(Slntmll Slaui &rl(onI Sitbrarg Cornell University Library KF 1045.S79 1922 The law of suretyship, covering personal 3 1924 018 855 001 The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924018855001 The Law of Suretyship COVERING Personal Suretyship, Commercial Guaranties, Suretyship as Related to Bonds to Secure Private Obligations, Official and Judicial Bonds, Surety Companies By ARTHUR ADELBERT STEARNS, LL. D. OF THE CLEVELAND BAR Third Edition by WELLS M. COOK OF THE CHICAGO BAR Professor of the Law of Suretyship and Negotiable Inatruments Chicago Kent College of Law CINCINNATI THE W. H. ANDERSON COMPANY PUBLISHERS 1922 6/^^;LAf-^, 1922 OOPTBIGHT THE W. H. ANDBEISON CO. Cincinnati, Ohio. PREFACE TO THIRD EDITION In order to meet the demand for a modern text on the law of suretyship this revision is presented. The publication has been brought down to date, with reference to the later decisions and new application of principles. The effort has been to put into the work the last expression of the law on the subjects discussed in its pages. "Striving to better, oft we mar what's well," has ever been kept in mind by the editor. Changes in the text have been made only where considered absolutely necessary. Professor Stearns' original text has the distinguished merit of lucidity, both in analysis and statement. The text discusses the fundamental principles underlying the law of suretyship, with exceptions to, explanations and applicatiola^ of^ tjig ^tii^iples, together with the leading decisions announcing and supporting each, as well as the contrary contentions, doctrines, and holdings. The revision shows that although the law of suretyship is not a closed subject, the rules applicable to corporate or compensated suretyship are essentially the same as those applicable to the law of insurance. The arrangement of the subject-matter in this edition follows the same order as the former editions, with the same classified numbering. The chapter in the first edition on "Suretyship as Related to Negotiable Instruments, ' ' omitted in the second edition, has also been omitted in this edition. The adoption in most states of the Uniform Negotiable Instruments Act or Code has superseded the law of suretyship as heretofore ap'plied to negotiable instru- ments, and has substituted therefor the law as declared by the Act or Code itself. "Stearns' Cases on Suretyship" has also been re-edited and revised. The cases are carefully selected and cover the subjects. The cases added are selected as to importance, clarity, and con- trolling authority at the present time. Wells M. Cook. Chicago, July 31, 1922. CONTENTS CHAPTER I. THE CWlSniRACT. SECTIOK. p^OE. 1. Suretyship defined 1 2. The nature of the contract 2 3. Personal suretyship 3 4. Real suretyship 3 5. Parties to the contract 4 6. Surety and guarantor distinguished 5 7. Indorser 7 8. Irregular or anomalous indorser 7 9. Irregular indorsement before and after delivery 9 10. Irregular indorser held only as Indorser 10 11. Who may become promisors in suretyship 12 11a. Disability of the principal 12c 12. Disability by statute 12c 13. Surety companies 12d 14. Duress 12d 15. Fraud in the making of the contract 13 16. Consideration 15 17. Suretyship contract must be express 17 18. Ambiguous words. — How interpreted 18 19. Estoppel of promisor to deny recitals in the contract 20 20. Incompleted contracts of suretyship , 21 21. Statutory requirements 22 22. Contracts in suretyship executed by agents. 33 23. Suretyship by operation of law 24 23a. The execution of the contract 25« CHAPTER II. THE STATUTE OfF FRAUDS. 24. The purpose of the statute of frauds 26 25. The English statute _ 27 26. Meaning and scope of the word "agreement" 29 27. Same subject continued. — American decisions 30 28. The "Memorandum or Note'' 33 29. Same subject continued 34 30. The signature to the memorandum 3« SECTION. PAGE. 31. "Special Promise" 'to whom maxie .' 37 32. Same. — Applied to contracts of indemnity 37 33. Same subject continued 38 34. Same subject continued. — American decisions '. 40 35. All contracts of suretyship are within the statute of frauds.... 41 36. Credit given wholly to promisor 42 37. Joint liability of promisor and another 43 3'8. Discharge of original debtor 44 39. Consideration beneficial to promisor. — ^Co-existing liability of another is not always a test of suretyship 45 40. Promise to pay debt of another out of property of debtor in promisor's hands 46 41. Release of liens and securities by creditor as basis of original promise 48 42. Promise to pay pre-existing liability of promisor not within the statute 49 43. Assumiption of vendor's debt as part of purchase price not within the statute 51 44. Contract of Del Credere agent not within the statute 51 45. Pleading transactions within the statute. — Plaintiff's allegations. 52 46. Pleading statute as a defense 52 47. Lex Pori^ — ^The statute of frauds remedial 54 CHAPTER III. COMMERCIAL GUARANTIES. 48. Scope of the subject 55 46. Construction of contracts of guaranty 56 50. Construction of equivocal or ambiguous words 59 51. General guaranty 63 52. Special guaranty 64 53. Guarantor for one principal not held for joint principals 65 54. Guarantor for joint principals not held for one 65 55. Retrospective guaranties 66 56. Guaranty without knowledge of principal debtor 67 57. Consideration qj 58. Form of guaranty gg 59. Continuing guaranties 70 60. Same subject continued 72 61. Absolute guaranties 73 62. Guaranty of collectibility 74 63. Test of due diligence 75 64. Notice to guarantor of acceptance of the guaranty and advance- ments thereon 77 CONTENTS. VU SECTION. p^Qj, 65. Federal court rule as to notice of acceptance of guaranty 80 66. Rule of the State courts as to notice of acceptance of guaranty . . 83 67. Notice of guarantor of default of principal 85 68. Cases in which notice to guarantor of default is neceessary 89 69. Joint and several guaranties ; 92 70. Guaranty covers interest gg 71. Revocation of guaranty 94 CHAPTER IV. SXJRETYSHIP DEFENSES. 72. Material alteration of principal contract „,-. gs 73. Same subject continued 90 74. Same subject continued 102 75. Alteration of principal contract by the addition of new parties. lOS 76. Alteration of principal contract by a change in the duties of the principal 106 76a. Building contracts 107a 77. Variation in amount of advancements tmder limited guaranty. — 76b. Building contracts. — Changes in the manner of payment 107e Effect upon guarantor 108 78. Change of parties 109 79. Alterations beneficial to the surety or guarantor 110 80. Alterations enlarging the principal liability 113 81. Discharge of promisor by extension of time 114 82. Agreement for extension must be for a consideration 11.5 83. Payment of advance interest as a consideration for extension. . . .117 84. Agreem.ent for extension must be for a definite time 119 815. Extension of time by the execution and delivery of a note for the debt payaJble at a. later date , 1 19 86. Collateral securities maturing at a, later date 120 87. Extension of time by Act of Legislature 121 88. Giving time to surety. Effect upon co-surety 122 89. Giving time is not a defense if the surety is fully indemnified . . . 12S 90. Extension of time as a defense to persons who are in the situa- tion of a surety 124 91. Extension by appeal or continuance in judicial proceedings 127 91a. Extension of time a defense under negotiable instrument Codes.. 128 92. Extension of time with reservation of rights against the surety. 128h 93. Agreement not to sue as distinguished from agreements to extend. — Eflfect upon surety 129 94. Waiver of the defense of extension of time 130 95. Delay of the creditor in pursuing remedies against the principal as a defense to the surety or guarantor 131 96. Payment or other satisfaction as a discharge of the surety or guarantor ....13o Viii CONTENTS. SEX3TI0N. PAGE. 97. Liability against surety or guarantor revived if payment or substituted security is void 135 98. Voluntary release of security held by the creditor or upon which the creditor has a lien 137 99. Release of securities by the misconduct of the creditor 140 100. Release of securities by operation of law 143 101. Release by the creditor of property of principal in his possession or control, but not held as security for the suretyship ddbt . . 145 102. Whatever releases principal will release the surety or guarantor. 146 103. Sajne subject. — Release of principal by operation of law 147 104. Same subject. — In cases where the release by operation of law is not the result of the fault or procurement of the creditor. . . 149 106. Suretyship obligations obtained by fraud of the creditor 150 100. Same subject. — Concealment or non-disclosure of facts by the creditor 152 107. Discharge of promisor by failure to disclose facts coming to the knowledge of the creditor, after the execution of the con- tract 156 108. Fraud and misconduct of the principal 158 109. Misconduct of the principal, by delivering suretyship obligations without complying with conditions 159 110. Suretyship contracts made in reliance upon promises of the cred- itor 162 111. Conditional contracts of suretyship. — Parol evidence not compe- tent to show conditions 165 112. Same subject. — Parol evidence competent in certain cases 166 11'3. Release of promisor by the creditor 168 114. Release of a co-promisor by the creditor 170 115. Defense of the promisor based upon the failure of the creditor to sue the principal when requested 173 116. Same subject. — The doctrine of Pain vs. Packard 176 117. The principal's right of set-off or counterclaim against the cred- itor as a defense to the promisor 178 118. Defense based upon the right of the promisor to control the application of collateral 181 119. Revocation. — Death of the promisor 184 CHAPTER V. BONDS TO SECURE PRIVATE OBLIGATIONS. 120. Private obligations distinguished from oflSeial duty in public office Igg 121. A bond is a specialty. — Form and execution 190 122. The signing and sealing of a bond 191 123. Delivery and acceptance are necessary to the validity of a bond . . 194 124. Incomplete bonds. — Right of the obligee to fill blanks 195 CONTENTS. IX SECTION. PAGK. 125. The incorporation of otiher instruments into the bond by refer- ence 196 126. Consideration 198 127. Bonds obtained by fraud or misrepresentation 200 128. Parol evidence in aid of construction 202 129. Commencement and duration of liability upon a bond 204 130. Bonds of general indemnity 206 131. Bonds to secure building contracts, witli covenants for the pay- i ment of labor and material claims 207 132. Alteration of the principal contract as a defense to sureties upon the bond 211 133. Alterations in bond as a defense to the sureties 214 134. Surety upon bond estopped from^ denying the recitals of the bond. 21.5 135. Measure of damages upon breach of the conditions uf a bond 217 136. Same subject. — Where the penalty or forfeiture is imposed by statute 220 137. Interest as an element in the measure of damages 222 138. Bonds to induce violation of law are void 222 139. Bonds to* prevent performance of public duty or to induce acts in violation of public duty are void 225 140. Discharge of surety upon a bond by payment or acts equivalent to payment 226 141. Statutes of limitations as a defense to sureties upon a bond. . . .287 142. As to who are proper parties in an action upon a bond 231 143. Joinder of parties plaintiff 233 144. Joinder of parties defendant 234 CHAPTER VI. OFFICIAL BONDS. 145. Who are public officers 237 146. The duty of a public officer to give a bond arises from statute. . .241 147. Bond of deputies 244 148. Qualifications and approval of sureties 246 149. The signing of the bond by the principal 248 150. Liability of sureties as affected by failure to deliver or furnish the bond within the time required by law .249 151. Sureties upon official 'bonds discharged by alterations to which they do not consent 252 152. Alteration in the duties of the principal by amendment to the law 253 153. Extension of tenure of office by legislative act , 256 154. Special bonds given by officers wljo have also given general bonds. 257 155. Concealment of matters material to the risk 258 156. Bonds of public officers not retroactive and cover only the period named in the bond 259 X CONTENTS. SECTION. PAGE. 157. Same subject. — Where the wrongful act was partly in one and partly in another term ■ 263 158. Second bond given in the same term cumulative 263 159. Liability of surety for the negligence or error in judgment of a, public oflBcer 26^ 160. Liability of sureties for failure of public officer to account for the use of public funds 265 161. Sureties not liable for defaults of principal in not performing his contracts with persons dealing with him in his official ca- pacity 269 16£. Sureties upon official bonds are not released by the negligence or misconduct of other officials 270 163. Sureties not liable for failure to account for money received by the principal outside the scope of his office 271 164. Liability upon bond of sheriff or constable- for trespass and other wrongs committed colore officii 274 165. View that sureties are not liable for wrongs of sheriff or con- stable committed colore officii 279 166. Liability for loss of public money by failure of the bank used as public depository 280 167. Liability for loss of public money by theft or robbery 284 168. Liability against judicial officers acting without jurisdiction . . . 287 169. Liability of judicial officers for ministerial acts 291 170. Liability of principal for acts of his deputy 293 171. Liability on bond of a notary public 294 172. Defenses in actions upon bonds of public officers 294 173. Presumption that official duty has been performed 297 174. Evidence against sureties on official bonds 298 175. Same subject. — Judgment against principal as evidence against the surety 300 176. Same subject. — View that judgment against the principal is prima facie evidence against the surety 302 177. Same subject. — View that judgment against the principal is con- clusive against the surety 303 178. Limitations upon actions against sureties on official bonds 305 CHAPTEK VII. JUDICIAL BONDS. 179. Suretyship in the application of legal remedies 308 180. Bonds for stay of execution or appeal 312 181. Statutory requirements as to appeal or stay bonds 314 182. Irregularities or defects whereby bonds are invalidated 317 183. Immaterial defects in the contract 319 184. Failure to perfect the appeal 320 18 J. Conditions upon which appeal or stay bonds become payable .... 322 CONTENTS. XI SECTION. PAGE. 186. Same subject. — Affirmance by failure to prosecute appeal S24 187. As to when action may be brought upon bond for appeal 327 188. Measure of damages in an action upon an ajpeal or stay bond. .329 189. Successive appeal bonds 334 1'90. Defenses in actions upon appeal bonds. — Estoppel 335 191. Appeal from a justice court 336 192. Bonds to procure injunction 337 193. When action for damages upon an injunction, bond accrues 339 194. Construction of bonds to procure injunction 343 19io. Defenses of sureties upon injunction bonds 344 196. Measure of damages for breach of injunction bond 346 197. Same subject. — Defendant's expenses in procuring a dissolution of injunction 348 198. Attachment bonds 350 190. Attachment bonds not forfeited for irregularities of execution or defects in form 352 200. Whether damages for malicious prosecution are recoverable upon bond to procure attachment 353 201. Forthcoming or redelivery bonds 3515 202. Bonds to discharge attachment 356 203. When action accrues upon bonds in attachment 358 204. Good faith of the plaintiff, or probable cause for attachment not a defense in actions upon bonds 361 205. Sureties estopped from questioning the regularity of the proceed- ings out of which their liability arises 362 206. Exoneration of sureties in attachment proceedings 363 aOT. Attachment bonds are available in any court to which the case is taken on appeal 364 208. Measure of damages in actions upon attachment bonds 365 209. Replevin bonds 367 210. Conditions of bonds in replevin 368 211. Bonds in replevin which are void 366 212. What constitutes a breach of a replevin bond 369 213. Sureties upon replevin bonds are concluded by the final order in the replevin action 370 214. Measure of damages in action upon replevin bond 371 215. Defenses in action on replevin bonds 373 216. Bonds given in the course of the administration of estates of deceased persons 375 217. Duties for w'hich executors and administrators are chargeable on their bonds 375 218. The scope of the administration bond covers all assets and equi- ties of the estate 378 219. Successive administration bonds are cumulative 380 220. ' As to whether judgment or order of court against the principal is necessary to a cause of action on the admanistration bond. .381 221. The sureties upon the bond of an administrator are concluded by judgment against the principal 383 X'U CONTENTS. StXJTIO.V. PAG£. 222. Defenses to action upon administration bonds 384 223. Who may maintain action on administration bonds 385 224. Bonds of guardians — Scope of liability 386 225. Settlement of guardians' accounts. — ^Release of sureties on the bond 388 226. An adjudication against the guardian is conclusive against the sureties 389 227. Bonds given in the course of insolvency proceedings 390 228. Bail bonds 391 229. Conditions in bail bonds. — Time of appearance 392 230. Same subject. — Place of appearance 394 231. Defenses against bail bonds 396 232. Discharge or exoneration of bail 397 CHAPTER VIII. COBPOiRATE SURETYSHIP. 233. Surety companies. — Compensated' suretyship 401 234. Private and corporate suretyship compared 408 235. Corporate suretyship and insurance compared 409 236. Corporate suretyship as affected by the premium pr compensa- tion paid 410 237. Corporate compensated suretyship is within the statutes of frauds 412 238. Construction of corporate suretyship contracts 413 239. Surety company bonds as affected by the sjipcial stipulations in- serted for their protection in the contract 416 240. Same subject. — Stipulation that the obligee shall notify the surety of an act of the principal that "may" invoU'e loss upon the bond 417 241. Stipulations dischaiging surety if claim is not made within a, designated time 420 242. Stipulation that the amount paid by surety upon the bond shall be conclusive against the principal in an action by the surety against the principal for indemnity 421 343. Contract of the compensated surety valid only as a, collateral undertaking ., 422 243a. Joint-control of trust funds 424 CHAPTER IX. THE RIGHTS AiND REMEDIES OF THE PROMISOR AFTER PAY- MENT. 244. Subrogation 426 345. Subrogation arises only when claim is paid in full 430 240. Subrogation is a mere equity and will not be applied against the legal rights of others dealing with the principal 432 CONTENTS. xiii SB«TION. PAGE. 247. The promisor who pays is entitled to have the securities held by the creditor assigned to him 434 348. Subrogation extends not only to securities tut also to all reme- dies of the creditor 43.5 ; 349. Surety paying judgment against the principal will be subro- gated to the lien and other rights of the creditor under the judgment 440 350. A suretyship promisor who pays will be subrogated to any mort- gage security which the creditor holds for the debt 444 251. Subrogation applies to one in the situation of a surety 447 252. Surety who pays the debt is entitled to be subrogated to a pro rata share of any dividend which is derived from the assets of the principal 450 253. Subrogation among co-sureties 453 254. Subrogation between successive sureties 434 255. Subrogation in favor of the creditor to securities held by the surety 435 256. Same subject. — The view of the English courts 463 257. Remedies of the surety in cases where he is deprived of subroga- tion by act of the creditor 46.t 35s. When surety will be subrogated to the principals' claims of set- off against the creditor 466 259. Subrogation not available to one who pays the debt of another as a mere volunteer 467 260. Conventional subrogation 470 361. Waiver of subrogation 472 262. Contribution between co-sureties. — General principles 473 263. Contribution between sureties bound by different instruments. . .477 264. A surety for a surety not liable in contribution 480 265. Contribution as affected by special contract between sureties. . .481 266. Contribution between persons in the situation of a surety 482 267. One who becomes surety at the request of a co-surety is liable in contribution to such co-surety . . . . : 483 268. One who aids in the commission of the default is barred from the right of contribution 485 269. When contribution may be enforced 486 370. Equitable contribution or the right of a surety to call upon his co-surety for exoneration before payment 488 271. Amount recoverable in contribution 48n 272. Contribution as affected by the insolvency of one or more co-sure- ties 490 273. Contribution as affected by absence from the jurisdiction or by the death of a co-surety 490 274 Surety seeking contribution must account to his co-sureties for indemnity furnished him by the principal 491 275. Surety may enforce contribution even though payment by him was without compulsion 495 XIV CONTENTS. SECTION. PABB 276. Contribution as affected by the release of one or several co-sure- ties 498 277. Bankruptcy of a, surety. — Effect on co-surety's right of contribu- tion 499 278. Contribution between parties to bills and notes 501 279. The right of indemnity against the principal 503 280. When right of indemnity arises 507 281. Equitable exoneration 508 282. Eight of indemnity arises from payment or transactions equiva- lent to payment 509 283. Amount recoverable by indemnity proceedings 511 284. Eight of indemnity as affected by the non-liability of the princi- pal 513 285. Eight of indemnity as affected by the non-liability of the surety or guarantor 515 286. When judgment against the surety or guarantor is conclusive as to the right to recover indemnity 517 287r Indemnity as affected by the bankrupt of the principal 517 THE LAW OF SURETYSHIP. CHAPTER I. THE CONTRACT. Suretyship Defined. The Nature of the Contract. Personal Suretyship. Real Suretyship. Parties to the Contract. Surety and Guarantor Distinguished. Indorser. Irregular or Anomalous Indorser. Irregular Indorsement Before and After Delivery. Irregular Indorser Held Only as Indorser. Who May Become Promisors in Suretyship. 11a. Disability of the Principal. Disability by Statute. Surety Companies. Duress. Fraud in the Making of the Contract. Consideration. Suretyship Contract Must be Express. Ambiguous Words — How Interpreted. Estoppel of Promisor to Deny Recitals in the Contract. Incompleted Contracts of Suretyship. Statutory Requirements. Contract^ in Suretyship Executed by Agents. Suretyship by Operation of Law. The Execution of the Con tract. i§l. Siiretyship defined. Suretyship embraces all forms of obligations to pay the debt or answer for the default of another.^ 1 "Suretyship is an , accessory be conceded. The word "Surety," agreement by which one binds him- however, has acquired a general self for another already bound." and a special meaning. In general. Hough vs. Aetna Life Ins. Co., 57 it means a security of any sort, 111. 318, 11 Am. Rep. 18. The and, outside of legal phrase, has desirability of defining legal terms, such accepted meaning. As a spe- by giving to them, so far as pos- cial term of the law it is re- sible, their generally accepted stricted to a security of a certain meaning in popular discourse, will See. 1. Sec. 2. Sec. 3. Sec. 4. Sec. 5. Sec. 6. Sec. 7. Sec. 8. Sec. 9. Sec. 10. Sec. H. Sec. lla. Sec. 12. Sec. 13. Sec. 14. Sec. 15. Sec. 16. Sec. 17. Sec. 18. Sec. 19. Sec. 20. Sec. 21. See. 22. Sec. 23. Sec. 23a. a THE LAW OF SUHETTSHIP. The person wh*, is so botmd in a contract of suiietyship is called either a Surety, a Guarantor or an Indorser. It is not strictly accurate, although in common use, to employ the ex- pression " Suretyship and Guaranty." Guaranty is a subdivision of suretyship. The term describes the obligation assumed by one who becomes a Guarantor in a suretyship relation. This obligation is different in some im- portant respects from the contract made by the Surety and Indorser, yet each are promisors in a suretyship contract. g2. The nature of the contract. 'No one incurs a liability to pay a debt or perform a duty for another unless he expressly agrees to be so bound. The law does not create relations of this character by mere impli- cation. Suretyship arises only " in contract, and such a con- tract to be binding must be entered into for a consideration, must be duly executed between parties competent to contract, and without duress or fraud and must be in writing.^ The early adjudications in suretyship treated the contract as one of great burden to the promisor, because of the fact that it was usually entered into for accommodation mesrely, and with- out any participation in the benefits of the principal contract. kind. No good reason is apparent " suretyship " is not used at all. why the broader term suretyship, 2 Involuntary suretyship, result- when carried into legal parlance, ing from the operation of law, is should also be given a restricted not an obligation to pay the debt meaning. Bouvier says: "Surety- of another imposed by implication, ship is a primary obligation to see or by the law, but is merely ex- that the debt is paid, while guar- tending the privileges of suretyship anty is a collateral undertaking.'' to parties already bound. (Post This invention of the distinguished Sec. 23.) lexicographer has been followed by 3 Ingersoll vs. Baker, 41 Mich. 48. many and rejected by many, with The English Statute of Frauds the result that the word, surety- (29 Chas. II., Chap. 3) has been ship, is being used in a double substantially re-enacted in all the sense in our law> The authority states, and provides that no action cited by Bouvier (Dole vs. Young, shall be brought to qharge anyone 24 Pick. 250) doea not sustain his upon a promise to pay the debt of use of the word. The case merely another, unless the agreement is in defines guaranty ::nd the word writing. (See Post, Chap. 2.) THE CONTRACT. 3 These facts were not without their influence upon courts, and gave rise to a line of precedents of strict construction aga?Tist the one claiming under a suretyship contract.* In addition to the fact that the promisor in a suretyship contract usually derived no benefit from it, the attention of courts has always been specially directed to the peculiar position of the obligor, in that his liability is fixed by the default of another over whose conduct he may not be able to exercise any control. The nature of the contract invokes equitable considerations in the construction without, however, excluding the rules for the construction of ordinary contracts. §3. Personal suretyship. Agreements of persons, real or artificial, to pay the debt of another may be denominated Personal Suretyship, in difr tinction from obligations in rem, or the use of 'property, real or personal, as a security for debt. §4. Eeal suretyship. The term real suretyship^ or obligation resting upon specific property as i security for debt, is a legal fiction, but a very useful one. It expresses the rights which one person acquires in specific property of another to secure a debt, and is a con- venimt classification in suretyship. ♦ Liord Arlington vs. Merrieke, 2 ation after it is made, though hene- Saund. 412; Law vs. East India Cow, ficial to the surety, has the same 4 Ves. Jr. 824; Hassell vs. Long, 2 effect. His contract exactly as M. & S. 363; London Assurance Co. made is the measure of his liabil- V8.Bold,6 Ad. & Ell. 514; Chase vs. ity; and, if the case against him be McDonald, 7 Har. & John. 160; Mil- not clearly within it, he is entitled ler vs. Stewart, Q^Wheat. 680 ; Ma- to go acquit." gee vs. Manhattan Life Ins. Co., 92 Barnes vs. Barrow, 61 N. Y. 42; U. S. 98. Swayne, J.: "A surety is Kingsbury vs. Westfall, 61 N. Y. 'a favored debtor.' His rights are 360; Nat. Mechanics' Banking Assn. zealously guarded both at law and vs. Conkling, 90 N. Y. 116; Ander- in equity. The slightest fraud on son vs. Bellenger, 87 Ala. 334; 6 the part of the creditor, touching South. 82; State vs. Medary, 17 0. the contract, annuls it. Any alter- 554. 4 THE LAW OF SUEETYSHIP, We generally say that a person has a lien upon property, rather than say certain property is under an obligation to a person. But lien includes other transactions than pledge and mortgage, which are the particular subjects of real suretyship." §5. Parties to the contract. It requires three parties to make a contract of personal sure- tyship, (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 credit- or; (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.' B The law frequently substitutes its own will for the agreement of parties in the creation of liens or obligations resting upon property, >uch as judgment liens and other liens created by statute. The " es- tate by elegit," created by one of the early Westminster Statutes in England, is a further illustration. By this statute, it was provided that after one has a. judgment for his debt he may have a writ en- titling him to the possession of one half the defendant's lands to be held until the judgment is fully paid. — III Blackstone 418. « A general term which shall, in- clude Surety Guarantor and Indors- er, is useful in stating ti>e Law of Suretyship. Some needless confu- sion has arisen in cases where a general principle of suretyship was involved, but which involved no nec- essary construction of the exact character of the promisor, by the failure to discriminate between the different obligations which are im- posed by the contract of the Surety and Guarantor, and by using the terms interchangeably, as if they were legal synonyms. In Wendlandt vs. Sohre, 37 Minn. 162, 33 N. W. 700, the court is reported as saying : " A surety is any person who, being liable to pay a debt, is entitled, if it is enforced against him, to be indemnified by some other person who ought him- self to have paid it before the sure- ty was compelled to do so." The law, as thus stated, is not peculiar to a Surety, but is applicable also to one who is a Guarantor, and, with some modifications, to an In- dorser, and the court doubtless in- tends to be so understood, but has used the term " Surety " in a gen- eral sense as inclusive of other forms of obligation in suretyship. A more pronounced anomaly oc- curs in People vs. Backus et al., 117 N. Y. 196, 22 N. E. 759, where the Court uses the expression "the sureties when they signed their guaranty " meaning no doubt Guar- antors instead of Sureties. This THE CONTEACT. §6. Surety and guarantor distinguished. A Surety undertakes to pay the debt of another. A Guar- antor undertakes to pay if the principal debtor does not ' or cannot. A Surety joins in the contract of the principal, and becomes an original party with the principal. The Guaran- tor does not join in the contract of his principal but engages in an independent undertaking.'" A Surety promises to do the same thing which the principal undertakes; the Guarantor promises that the principal will perform his agreement and if he does not, then he, the Guarantor, -ndll do it for him. The liability of the Surety is immediate and direct. He agrees that he will perform the principal contract, fixing upon himself the responsibility from the beginning. If, however, ■was an action upon an agreement reading as follows: "In considera- tion of the making the deposits by the People of the State of Xew York in thf First National Bank of Auburn, in the agreement men- tioned, and for value received, we, the undersigned, B, K and H, do hereby jointly and severally guwr- antee the full and punctual per- formance of the condition of said agreement on the part of said bank. The said Guarantors may serve upon the comptroller a written notice, terminating or lim- iting their liability under this gua/r- anty, etc.'' The court in construing this instrument employs the word "Sureties" in referring to the obli- gors. The use of the word "Surety" as descriptive of any form of promise to pay the debt of another seems to be firmly fixed in the layman's vo- cabulary, and not altogether eradi- cated from judicial parlance. See also Singer Mnfg. Co. vs. Littler, 56 Iowa, 601; 9 X. W. 905, where the expression "The Surety in a Con- tract of Guaranty" is used. Even the Supreme Court of the United States, with the excepti r, -r, . . , nT -ii. i 1 liable to payee.) Spencer vs. AUer- Browning et al. vs. Merritt et ai., ' 61 Ind 425 ' "• *'^' ^ -'^*^- '^'^^■ 260 Alabama — (Liable to the'payee '" ^ with privileges of an indorser.) Do'.aware— Surety. ) Gilpin vs. Milton vs. DeYampert, 3 Ala. 643; ^^arlcy, 4 Hoast. 284. Price vs. Lavender, 38 Ala. 330; Georgia— (Surety.) Collins va. Alabama Nat. Bank vs. Rivers, 116 Everett, 4 Ga. 200; Camp vs. Sim- Ala. 1; 22 South. 560. mons, 62 Ga. 73. (Statutory.) 12 THE LAW OF SUKETYSHIP. §11. Who may become promisors in suretyship. ^ In general, any one who has the capacity to bind himself in any contract may do so in suretyship. Such promisor must be of sound mind and under no disability, such as infancy or coverture, and the transaction must be free from fraud or duress. Illinois— (Indorser.) Tucker vs. Mueller, 287 111. 551, 122 N. E. 847. Iowa — (Guarantor.) Robinson TS. Eeed, 46 la. aiS; Oonger vs. Babbet, 67 la. 13; 24 N. W. 569. ('Statutory. ) Kansas — (Guarantor.) Fullerton vs. Hill, 48 Ks. 55S; 29.Pae. 583. Kentucky — (Guarantor.) Arnold vs. Bryant, 8 Bush 6i88. (Statu- tory.) Louisiana — ( Surety. ) Lawrence vs. Oakley, 14 La. 389; Chorn vs. Merrill, 9 La. Ann. 5381; Collins vs. Trist, 20 La. Ann. 348. Maine — ( Surety. ) Leonard vs. Wildes, 36 Me. 265; Sturtevant vs. Randall, 53 Me. 149; First Nat. Bank vs. Marshall, 73 Me. 79. Maryland — ( Surety. ) Ives vs. Bosley, 35 Md. 262; Walz vs. Al- 6ack, 37 Md. 404; Schroeder vs. Turner, 68 Md. 506; 13 Atl. 331. Massachusetts^ — ( Joint maker. ) Ohaflfee vs. Jonesi, 19 Pick. 263; Way vs. Butterworth, 108 Mass. 509. Michigan — (Surety.) Wetherwax vs. Paine, 2 Mich. 559; Rothschild vs. Grix, 31 Mich. 150; Moynahan vs. Hanaford, 42 Mich. 320; 3 N. W. 944; Gumz vs. Geigling. 108 Mich. 295; 66 N. W. 48. Minnesota — (Surety.) Peckham vs. Oilman, 7 Minn. 446; Stein Tna PassDiiore, 25 Minn. 256. Missouri — (Surety.) Schneider vs. SchifTman, 20 Mo. 571; Ohaflfee vs. Memphis Ry., 64 JIo. 193'. Nebraska — (Surety.) Salisbury vs. First Nat. Bank, 37 Neb. 872; 56 N. W. 727. New Hampshire — (Surety.) Sar- gent vs. Bobbins, 19 N. H. 572; Cur- rier vs. Fellows, 27 N. H. 366. Nevada — ( Guarantor. ) Van Dor- en vs. Tjader, 1 Nev. 380. North Carolina — ^(Surety.) Baker vs. Robinson, 63 N. C. IS'l. Ohio — (Surety.) Bright vs. Oar- penterj 9 0. 1S9; Greenough vs. Slnead, 3 0. S. 415; Ewan vs. Brooks- Waterfield €b., 55 0. S. 596; 4i5 N. E. 1094. By Statute (See. 8169, General Code) enacted in 1902, the irregular indorser signing be- fore delivery is deemed an indorser and entitled to demand and notice and liable to the payee and all sub- sequent parties. ;See also 15 Ohio Law Reporter 580. Pennsylvania — 'In 1901 the legis- lature of, Pennsylvania provided as follows: "When a, person not other- wise a party to an instrument, places thereon his signature in blank, before delivery, he is liable as endorser in accordance with the following rules: 1. If the instru- ment is payable to the order of a third person, he is liable to the payee and all subsequent parties. 2. If the instrument is payable to the order of the maker or drawer or is payable to bearer, he is .liable to 11 parties subsequent to the maker THE CONTEACT. 12a An insane person can not bind himself by a suretyship con- tract even though the creditor who accepted him as such had no knowledge of the unsoundness of his mind.^' Such contract by an infant is voidable ^^ and becomes valid only when ratified by him after reaching maturity, and with knowledge that he was not bound by the original transaction.^" Married women in some states may become promisors in suretyship by reason of sta.tutes giving to them the same power to contract, as men.^° "When such statutes do not exist, they cannot become bound to pay the debt of another.^^ A corporation may bind itself in suretyship, if done in the regular course of its business,^^ or whenever such a contract is or drawer. 3. If he signs for the accommodation of the payee, he is liable to all parties subsequent to the payee." Rhode Island — (Surety.) Perkins vs. Barstow, 6 R. I. 507. South Carolina — ( Surety. ) Car- penter vs. Oaks, 10 Rich. L. 17; Mc- Celvej' vs. Jvoble, 12 Rich. L. 167. Tennessee — (Guarantor.) Harding vs. ^Vaters, 6 Lea 32'4. Overruling Oomparee vs. Brockvpay, 11 Humph. 3'5'5, and Clowston vs. Barbiere, 4 Sneed 3»5. Texas — ( Surety. ) Latham va. Houston Flour Mills, 68 Tex. 127; 3 S. W. 462. But see Horton vs. Manning, 37 Tex. 23. Utah — (Surety.) McGee vs. Oon- nor, 1 Utah, 9S. Vermont — (Surety.) Strong vb. Riker, 16 Vt. 555. Virginia — (Guarantor.) Watson vs. Hurt, 6 Gratt. 633; Orrick vs. Colston, 7 Gratt. 189. West Virginia — Burton vs. Hans- ford, 10 W. Va. 470. The presumption of liability to the payee ma* be rebutted in all the foregoing States, and an under- standing of the parties that the anomalous indorser was to be liable only as second indorser may be shown, except where the rule re- sults from statute. 2' Van Patton & Marks v®. Beals & Hammer, 46 Iowa 62. =8 Plarner vs. Dipple, 31 O. S. 72-; Williams vs. Harrison, 11 S. C. 412; Curtin vs; Patton, II Serg. & R. 30'5. 29 Owen vs. Long, 112 Mass. 403; Fetrow vs. Wiseman, 40 Ind. 148. Contra — Anderson vs. Soward, 40 O. S. 325. 30 Low Bros. & Co. vs. Anderson, 41 Iowa 476; Mayo vs. Hutchinson, 57 Me. 546. 31 Gosman vs. Cruger, 69 N". Y. 87. In some states by statute a wife can not act as surety for her husband. People's Bank of Greens- boro vs. Steinhart, 65 iSo. 60; Manor Nat. Bank vs. Lowery, 242 Pa. 559, 89 Atl. 678; Burr vs." Beck- ler, 264 111. 230, 106 N. E. 206. iShe can so charge her separate es- tate. Perkins vs. Elliott, 23 N. J. Eq. 526; Stone vs. Billings, 167 111. 170, 47 N. E. 372; Bershizer vs. Florence, 39 Ohio St. 516. 32Phila. & P. R. Co. vs. Knight et al., 124 Pa. iSt. 58, 16 Atl. 492; Harrison vs. Union Pacific Ry. Co., 13 Fed. Rep. 522; Heims Brewing 126 THE LAW OF SURETYSHIP. necessary in order to carry out a power expressly conferred,^^ but an officer of a corporation cannot bind the corporation as such promisor, unless in pursuance of a direct authority from the corporation.^* A partnership can become a promisor in suretyship by its firm naine/' but one partner cannot so bind such firm without express authority, except where such contract is \pithin the usual scope of the business of the firm,^" or the other members of the firm afterwards ratify the contract by acting upon it.'' The unauthorized signing of the firm name to such contract will bind the individual member of the firm who affixes such signature.*' Co. vs. Flannery et al., 137 111. 309; 27 N. E. 286; Pollitz vs. Pub. Util. Comm., 96 0. S. 49; 117 N. E. 149, L. R. A. 1918D, 166; Depot Realty iSyndicate Co. v. Enterprise Brew- ing Co., 87 Or. 560; 170 Pac. 294; L. R. A. 1918C, 1001; Broadway National Bank vs. Baker, 176 Mass. 294; 57 N. E. 603; Timm vs. Grand Rapids Brewing Co., 160 Mich. 371; 125 N. W. 357. It is held in West- ern Maryland Railroad Co. vs. Blue Ridge Hotel Co., 102 Md. 307; 62 Atl. 351, that a railroad company has no implied power to guarantee interest and dividends upon bonds and stocks of a hotel company, al- though the latter is operated bene- ficially to the railroad by increasing its regular income from transporta- tion. See also J. P. Morgan & Co. vs. Hall & Lyon, 34 R. I. 273; 83 A. 113; Re Romadka Bros Co., 216 Fed. 113; Winterfield vs. Cream City Brewing Co., 96 Wis. 239; 71 N. W. 101. A lumber company may become surety on the bonds of a building contractor to induce him to purchase of the lumber company the lumber used In such building. Central L. Co. vs. Kelter, 201 111. 503; 66 N. E. 543. But see Best Brewing Co. vs. Klassen, 185 111. 37; 57 N. E. 20. The Brewing Co. executed a bond in appeal for one of its customers. The appeal was in furtherance of its own business interests. Held to be Ultra Vires, and that the surety was not estopped from asserting such defense. 33 Green Bay and Minn. R. R. Co. vs. Union Steamboat Co., 107 U. iS. 98; 2 Fed. 221; Arnot vs. Erie Ry. Co., 67 N. Y. 315. -But see Davis vs. Old Colony R. R?,- 131 Mass. 258. 34 Culver vs. Reno Real Estate Co., 91 Pa. St. 367. But if the cor- poration has the power to engage in an undertaking of guaranty, the power of the executive oflScer to exe- cute the contract will be presumed. Lloyd & Co. vs. Mathews, 223 111. 477; 79 N. E. 172. 35 Allen vs. Morgan, 5 Humph, (Tenn.) 624. 36 Davis vs. Blackwell, 5 111. App. 32; Osborn vs. iStone, 30 Minn. 25; 13 N. W. 922; Avery vs. Rowell, 59 Wis. 82; 17 N. W. 875; McQuewans vs. Hamlin, 35 Pa. St. 517; 'Seufert vs. Gille, 230 Mo. 453; 131 S. W. 102. 37 Crawford vs. Sterling, 4 Esp. 207; iSlandilands vs. Marsh, 2 Barn. & Aid. 673. 38 Whitaker vs. Richards, 134 Pa. iSt. 191; 19 Atl. 501. THE CONTRACT. 12o A national banking corporation cannot contract in suret>'- siiip,"" except that it may enter into such relation in the regular course of its business by transferring by indorsement commer- cial paper. The National Banking act gives to every bank the authority to exercise "such incidental powers as shall be necessary to carry on the business of banking; by discounting and negotiating promissory notes, drafts, bills of exchange and other evidences of debt. ' ' *" This statute gives to banks an im- plied power to become Surety or Guarantor whenever it be- comes necessary in negotiating commercial paper in the due course of their business.'" §lla. Disability of the principal The promisor is bound by his contract, even though the principal, by reason of infancy or coverture, or other in- competency, is not bound. Notwithstanding the disability of the principal, in the absence of fraud the debt remains in force and is valid, and its burden must be assumed by the promisor."" §12. Disability by statute. Where a certain class of persons are prohibited by statute from entering into particular forms of suretyship, the promi- sor will be bound notwithstanding the prohibition. These stat- utes furnish a justification to public officers in refusing to accept such prohibited persons as Sureties and Guarantors, and, in some cases, render the promisor liable to proceedings 39 Nat. Bank of Gloversville vs. *1" Lionberger vs. Krieger, 88 Mo. Wells, 79 'N. Y. 498; Knickerbocker 160; Weare vs. Sawyer, 44 N. H. vs. Wilcox, 83 Mich. 200; 47 N. 198; Winn vs. Sanford, 145 Mass. W. 123. 302; 14 N. E. 119; Gates vs. Teb- «U. S. Rev. St., Sec. 5136. The betts, 83 Neb. 573; 119 N. W. 1120; execution of a bond by a national Kyger vs. Sipe, 89 Va. 507; 16 S. bank as surety in a replevin suit E. 627; Adler vs. iState, 35 Ark. is beyond its powers and void. 517; Lee vs. Yandell, 69 Tex. 34; Bailey vs. Farmers Nat. Bank, 97 6 19. W. 665 ; Mitchell vs. Hydraulic 111. App. 66. Stone Co., Tex. Civ. App.; 129 S. « Peoples Bank vs. Nat. Bank, W. 148 ; Holm vs. Jamieson, 173 101 U. iS. 183; Thomas vs. Bank, 40 HI. 295; 50 N. E. 702. See post. Neb. 501; 58 N. W. 943. LStection 104. I2d *HE LAW OF SURETYSHir. in contempt of court for entering upon such contracts in de- fiance of statutes and rules of court, but the principle of estoppel will prevent an evasion of liability on the ground of the prohibition.*^ §13. Surety companies. The organization of corporations for the purpose of becom- ing Sureties and Guarantors upon bonds is sanctioned by the courts in all the states,*' and statutes regulating their accept- ance as sole Surety have been enacted in many states. The courts take Judicial notice of the Statutes authorizing Surety companies to be accepted as Sole Surety,** but a state has no power to prescribe rates of premium to be charged since a surety company is in every sense a private business.**" §14. Duress. A Surety or Guarantor who enters into his contract under duress is not bound by it, and, in this respect, contracts in suretyship follow the rule of other contracts.*" Whether or not the promisor is bound in case of duress practiced upon the principal alone has not been uniformly settled. The argu- ment is advanced that Suretyship depends at all times upon the existence of a valid subsisting principal contract between the principal and creditor, and that to hold the promisor and not the principal violates this axiom of suretyship.** *2 Holandsworth vs. Common- m Mich. 381; 69 N. W. 738; Bank wealth, 11 Bush (Ky.) 617; State of Tarboro vs. Fidelity and Deposit vs. Findley, 101 Mo. 368; U S. W. Co., 128 N. C. 366; 38 iS. E. 908. m ri 1 • r> nn tr ,11 44 Miller V8. Matthews, 87 Md. 11 1 ; Cook vs. Caraway, 29 Kan. 41 ; ^g^ ^^ ^^j_ ^.^ g^^ ' Chapter Tessier vs. Crowley, 17 Neb. 207; VIII. 22 X. W. 4'22 ; Ohio &, Miss. Ry. vs. 44a American Surety Co. vs. Shal- Hardy, 64 Ind. 454; Kohn Bros. vs. lenberger, 183 Fed. 636. Washer, 69 Tex. 67; 6 S. W. 551; f„ {?-?,l''^°" ''^- Ii°«' /o Barb. 346. ' TT -i J oj. J. 46\\ilkenson vs. Hood, 60, Mo. State of Kansas vs. Lnited States _^pp. 491. g^^te vs. Brantley et al., Fidelity and Guaranty Co., 81 Kan. 27 Ala. 44; Hawes vs. Merchant, 1 660- 106 Pae. 1040 Curt. 136; Patterson vs. Gibson, 81 43Ctamer vs. Tittle, 72 Cal. 12; ^?" If' /» '»: ^- f' ^^f"^^,^/- ,„ T> n,.r. n, ^ o Mynatt, 1 Heisk. (Tenn.) 675; 12 lac. 869; Cans vs. Garter & Walton vs. American Surety Co Aiken, 77 Md. 1; 25 Atl. 663; Tra- 264 Pa. 272; 107 Atl. 725 (1«19);' vis vs. Travis, 48 Hun 343; 1 X. Y. 68 American Law Register 383 S. 3o-, ; Steel vs. Auditor General, (1«20), reviewing controlling cases. THE CONTRACT. 13 Such reasoning appears eminently sound. Furthermore, if the promisor pays the debt his equitable right of indemnity could be enforced against the principal, and we get as a result the anomaly of the principal maintaining a successful defense against the creditor, and then responding to the same claim at the suit of the promisor. The weight of the authority is that duress of the principal will discharge the promisor except when he signs with knowledge of the duress.*' |15. Fraud in the making of the contract. (1) Fraud practiced by the creditor upon the principal in the making of the main contract stands upon the same reason^ ing as the duress of the principal. If the principal could rescind for fraud, the promisor in suretyship should be per- mitted to assert the same right.** (2) Fraud practiced by the creditor upon the promisor, or by the principal upon the promisor with the knowledge of the creditor, will discharge the promisor.*" The creditor owes " Hazard vs. Griswold, 21 Fed. Rep. 178; Peacock et al. vs. The People, 83 HI. 331'; Haney vs. Peo- ple, 12 Colo. 3'4;5; 21 Pac. 39; Gra- ham vs. Marks, 9« Ga. 67 ; 25 S. E. 931; Griffith vs. Sitgreaves, 90 Pa. St. 161; Schuster vs. Arena, 84 A. 723; 83 N. J. L. 79. As to duress in the execution of bail bonds in criminal proceedings, see Oak vs. Dustin, 79 Me. 23; 7 Atl. 815; Pluggins vs. People, 39 111. 241; Peacock vs. People, 83 111. 331. Contra — Robinson vs. Gould, 11 Gush. 55. Even vifhere surety has notice of the duress practiced on the princi- pal the courts have allowed the de- fense. "The relation between parent and child and husband and wife are so close and tender that the law recognizes that threats to imprison one will have substantially the same effect on the mind of the other, and what will deprive the one of the free exercise of his will or judgment will have a like effect on the other." Fountain vs. Bigham, 2315 Pa. 3'5; 84 Atl. 131. 48 Putnam vs. Schuyler, 4 Hun (N. Y.) 166; Oslborn vs. Robbins, 36 N. Y. 3615; Bennett vs. Carey, 72 Iowa 476; 34 X. W. 29il; City Natl. Bank vs. Jordan, 130' Iowa 499; 117 N. W. 758. Contra — Plummer et al. vs. The People, 16 111. 358; Ettlinger vs. National Surety Co., 221 X. Y. 467; 117 N. E. 945; 3 A. L. R. 865. In Evans vs. Keeland, 9 Ala. 42, it is held that a surety can not avail himself of the defense of fraud practiced by the creditor on the principal, unless the principal him- self repudiates the transaction. 49 Evans vs. Keeland, 9 Ala. 42; Waterbury vs. Andrews, 67 Mich. 281; 34 N. W. 575; Weed vs. Bent- ley, 6 Hill (N. Y.) 56; Roper et al. vs. iStagamon Lodge No. 6, 91 111. 518; Ham vs. Greve, 34 Ind. 18; 14 THE LAW OF SURETYSHIP. a duty of good faith to the promisor and he is required not merely to refrain from misrepresentation and deceit, but a concealment of facts which if known to the promisor would have prevented his entering into the contract, or which increases the risk of the undertaking will amount to fraud,"" as where one accepts a Surety upon a bond for the faithful performance of the duties of his agent who had previously while in his employ embezzled his property. If he withholds this infor- mation from the Surety, although not specifically inquired about, he cannot enforce the obligation.'^' The rule is carried to the extreme in a case where a cashier of a bank was a de- faulter, but this fact was not known to the bank, who there- after accepted a Surety for the faithful performance of his duty as cashier, and the reports of the assets and liabilities of the bank, published in accordance with the acts of Congress, showed the assets of the bank to be intact, held: that since the bank directors might have discovered the prior default by the exercise of reasonable diligence, that it was a fraud upon the Tiammell vs. ^Sjivaii, 25 Tex. 473; Math«ws, 10' 01. & Fin. 934; Frank- Bank vs. Railway Co., &5 Iowa 8192'; lin Bank vs. Cooper, 316 Me. 179; 22 N. W. 929; Meek vs. Frantz, 171 Dougherty vs. Savage, 28 Conn. 146; Pa. 602; 33 Atl. 413; lOampbell vs. Screwmian's Benev. Assn. vs. Smith, Johnson, 41 0. S. 508'; Satterfield 70 Tex. 168; 7 S. W. 793; Dins- vs. Spier, 114 Ga. 127 ; 30 S. E. more vs. Tidball et al., 34 O. S. 411 ; 930; First Nat. Bank vs. Mattingly, Lee vs. Jones, 17 C. B. N. S. 482; 92 Ky. eSQ; 18 S. W. 940; Putney Guardian Fire Assurance Co. vs. vs. Schmidt, 116 K M. 400 (120 P. Thompson, 6S Oal. 208; 9 Pac. 1; 720) : Sewell vs. Breathitt Lodge, Third Nat. Bank vs. Owen, 101 Mo. 150 Ky. 542; 150 S. W. 677. 558; 14 S. W. 632; Remington S. 50 Booth vs. Storrs et al., 75 111. M. Co. vs. Kezertee, 49 Wis. 409 ; 5 438 ; Pidcoek vs. Bishop, 3 Barn. N. W. 800 ; W. C. & A. Eiailroad Co. & Or. 60i5; Owen vs. Homan, 3 vs. Ling, 18 S. C. 116. Maen. & G. 378 ; Oomstock vs. Gage, Contra — Home Ins. Co. vs. Hol- 91 111. 328'; Barnes v. Savings Bank, way, 35 Iowa 5I7'1 ; 8 N. W. 457; 14'9 Iowa 387; 128 N. W. 541; I>omesitic S. M. Co. vs. Jackson, 15 Lingenfelter Bros. vs. Bowman, 137 B. J. Lea 41® ; Howe Mach. Oo. vb. X. W. 946; 156 la. 649. Farrington, 8i2 N. Y. 121; Aetna ^1 Owen vs. Homan, 3 Macn. & G. Life Tns. Co. vs. Mabbett, 18 Wis. 378; Franklin Bank vs. Steven, 39 677; San Francisco vs Staude 92l Me. 532; Sooy vs. State, 30 N. J. Cal. 560; 28 Pae. 77S; Roper et al Law, 135; Warren et al., vs. Branch vs. Sangamon, 91 111 519. Cawley et al., 15 W. Va. 21 ; Railton vs. et al. vs. The People. 9« 111 249 THE CONTRACT. 15 Surety to accept him in that relation without investigation of the previous conduct of the cashier.''^ (3) Fraud practiced by the principal on the promisor with- out the knowledge of the creditor will not avoid the contract."' §16. Consideration. In Suretyship as in other contracts a consideration is essen- tial.°* If the suretyship is concurrent with the principal con- 52 Graves vs. Lebanon Nat. Sank, 10 Bush (Ky.) 23. Contra — Savings Bank vs. Alljee, 63 N. H. 152; Lieberman vs. Wil- mington First Nat. Bank, 2 P«nne- will (Del.) 416; 45 Atl. 901. The creditor is not required to disclose trivial or immateriul defaults of the principal. Bositwick vs. Van Voor- his, 91 N. Y. 353; Baglin vs. Title Guaranty & Surety iCb., 166 Fed. 356. Neither is the creditor re- quired to disclose the financial con- dition of the principal. Smith vs. First Nat. Bank of London, 107 Ky. 267; 53 S. W. 648; Farmers Nat. Bank vs. Braden, 145 Pa. 473; 22 Atl. 1045 ; First Natl. Bank of Han- cock vs. Johnson,, 133 Mich. 700; &5 N. W. 9'7S. Neither is the creditor required to disclose facts which the promisor with reasonable diligence might have ascertained for liimseM. Sherman vs. Harbin, 125 Iowa 174; 100 N. W. 629; Sebald vs. Citizens Deposit Bank, 31 Ky. L. Rep. 1244; 105 S. W. 130. 63 Bigelow vs. Comegys, 5 0. S. 256; Dangler vs. Baker, 315 0. S. 673; Oasoni vs. Jerome, 58 N. Y. 315; Western N. Y. Life Ins. Oo. vs. Clinton, 66 N. Y. 3216; Taylor County vs. King et al., 73 Iowa, 153; 34 N. W. 774; McCormick vs. Bay City, 23 Mich. 457; State vs. Peck, 53 Me. 284; Sipencer vs. Handley, 5 Soott N. R. 546 ; Grraves et al. vs. Tucker, 10 Smedes & M. 9 ; Johnston VB. Patterson, 114 Pa. 398 ; 6 Atl. 746; Saginaw Medicine Oo. vs. Eatey, 179 Mich. 651; 146 N. W. 329; Cunini vs. Zambarano, 89 A. 2ft5.; 36 R. I. 122; Lovelace vs. Lovelace, 136 Ky. 452; 124 S. W. 400; Atlantic Trust & Deposit Co. VB. Union Trust & Title Corp., HO Va. 286; 67 S. E. 182. Contra — Stone vs. Goldberg & Lewis, 6 Ala. App. 249; 60 So. 744; W. T. Raleigh Medical Oo. vs. Wil- son, 60 So. 1001; 7 Ala. App. 242. But see Linn 'Oouiity, etc., v. Farris et al., 52 Mo. 75. The guarantor of a letter of credit who v\"as illiterate and unable to read was induced to sign the paper while intoxicated, the principal falsely representing ' that the paper was an application for a, license un- der the excise law. The creditor acted upon the letter of credit and shipped the goods without knowl- edge of the fraud or the other cir- cumstances under which the letter was obtained. Held that the guar- anty oould be enforced. Page vs. Krekey, 137 N. Y. 307; 33 N. E. 311. But see Schuylkill County vs. Cop- ley, 67 Pa. St. 386. 5* Pfeiffer vs. Kingsland, 25 Mo. 66; Barnes vs. Forbes, 118 N. Y. 580; 23 N. E. 890; Cowels vs. Peck, 55 Conn. 251; 10 Atl. 569; Briggs vs. Latham, 36 Kan. 206; 13 Pac. 129; Ohitwood ve. Hatfield, 13i6 Mo. App. 688; 118 S. W. 1192. 16 THE LAW OP SUEETYSHIP. tract, the consideration of the latter will support the former.'^ There need be no consideration moving directly to the promisor. The consideration may be subsequent to and disconnected with the consideration for the original debt, such as an extension of time or a forbearance to sue '" or the payment of money to the promisor as in the case of Surety companies. It is not essential that the consideration be adequate or compensatory,'' a nominal consideration, a mere detriment to the creditor will suffice. A past transaction or executed consideration will not be sufficient to support a suretyship.^* The consideration, how- ever, must not be illegal,^^ nor opposed to public policy."" If the original contract is entered into with an understanding •and upon the condition that the suretyship will be executed, the latter, when carried out, will relate back to the original transaction and be supported by the same consideration.*^ 5s Hughes vs. Littlefleld, 18 Me. 400; McNaught vs. McOlaughry, 42 N. y. 24 ; Bailey vs. Croft, 4 Taunt. 611; Robertson vs. Pindley, 31 Mo. 3S4; Savage vs. Fox, 60 X. II. 17; Basaett vs. O'Neil Coal Co., 140 Ky. 346; 131 S. W. 25; Bower vs. Jones, (S. D.) 128 N. W. 470. 50 Parklidrst vs. Vail, Ad.mr., 73 III. 343 ; Gay vs. Mott, 43 Ga. 262 ; Fuller vs. Scott, 8 Kan. 25; Pul- liam & Payne vs. Withers, 8 Dana (Ky.) 98; Dahlman vs. Hanunel, 45 Wis. 4©6; Coffin vs. Trustees, 92 Ind. 337; Lee vs. Wisner, 38 Mich. 82; Aultman & Taylor Co. vs. Gor- ham, 87 Mich. 233; 49 N. W. 486; Breed vs. Hillhouse, 7 Conn. 523; Davies vs. Funston, 45 Upper Can. (Q. B.) 369; Worcester Mechanics Savings Bank vs. Hill, 113 Mass. 25; Bower vs. Jones, 128 X. W. 470; 26 S. D. 414. Post Sec. 57. =' Lawrence vs. McCalmont et al., 2 How. (U. S.) 428; Davis vs. Wells Fargo & Co., 104 U. S."l59; Taylor vs. Wightman, 51 Iowa 411 ; 1 N. W. 607. 58 Thomas vs. Williams, 10 Barn. & Cr. 664; Pratt vs. Hedden, 121 Mass. 116; Ludwick vs. Watson, 3 Oreg. 256; Brant vs. Barnett, 10 Ind. App. 653; 38 X. E. 421; Jack- son vs. Jackson, 7 Ala. 791; Kissire vs. Plunkett-Jarrell Co., 145 iS. W. 567; 103 Ark. 473; Bank of Carrol- ton vs. Latting, 130 P. 144; 37 Okl. 8. 69 Estate of Ramsay vs. Whit- beck, 183 111. 550; 56 N. E. 322. 60 Rouse vs. Mohr, 29 111. App. 321; Board of Education vs. Thomp- son, 33 0. S. 321; Dpobold vs. Op- permann, 111 X\ Y. 531; 10 X. E. 94; United States Fidelity & Guar- anty Co. vs. Charles, 131 Ala. 658; 31 So. 558. In Citizens' Trust Co. vs. Tindle, 272 Mo. 681; 199 iS. W. 1025, the obligation was held binding on the surety to the extent that the trans- action was legal, though it was partially illegal. 61 Paul vs. iStackhouse, 38 Pa. St. 302 ; Stanley vs. Miles & Adams, 36 Miss. 434; Williams et al. vs. Per- kins, 21 Ark. 18; Ford vs. McLain, 164 Mo. App. 174; 148 S. W. 190; iStroud vs. Thomas, 139 Cal. 274; 72 Pac. 1008. THE CONTEACT. 17 §17. Suretyship contract must be express. In the ordinary contracts it often occurs that obligations arise from meve implication, such as when a person orders goods from a merchant, there is an implication that he thereby agrees to pay for them, and he is accordingly so bound. Again such contracts will be implied from the conduct of parties and the surrounding circumstances, without any express terms, verbal or written, such as when one performs services for another who accepts the benefits of such services. This will ordinarily give rise to a contract by inference to pay for the services; but there is no corresponding implication in suretyship, and the engagement must always be express, and the promise will never be enlarged to cover the implications growing out of the la% guage employed."^ It does not follow from this that ambiguous words and phrases are not in any case to be given force and effect as obligations in suretyship. To ascertain the meaning of ambiguous words and apply such meaning in the interpreta- 62 The State vs. Medary et al., 17 0. 965. "The bond speaks for itself; and the law is that it shall so speak; and that the liability of sureties is limited to the exact letter of the bond. Sureties stand upon the words of the bond, and if the words will not make them liable, nothing can. There is no construction, no equity against sureties. If the bond cannot have effect according to its exact words, the law does not authorize the court to give it effect in some other way, in order that it mtay prevail." Bishop vs. Freeman, 42 Mich. 533; 4 N. W. 390; Ludlow vs. Si- mond, 2 Cai. 1 ; Vinyard et al. vs. Barnes, 124 111. 346; 16 X. E. 2o4; Weir Plow Co. vs. Walmsley, 110 Ind. 242; 11 X. E. 232; Noyes vs. Granger, 51 Iowa 227; 1 N. W. 519; Henrie vs. Buck, 30 Kan. 381; 18 Pac. 226; Nat. Bank vs. Gerke, 68 Md. 448; 13 Atl. 358; Shines, Admr., vs. Central Savings Bank, 70 Mo. 524; Lee vs. Hastings, 13 Neb. 508; 14 X. W. 476; Gunn vs. Geary, 44 Mich. 615; 7 N. W. 235; Hutchinson vs. Woodwell, 107 Pa. St. 509'; Burson ^ns. Andes and wife, 83 Va. 445; 8 S. E. 249; State ex rel. Bell vs. Yates, 231 Mo. 27i6'; 13i2 S. W. 672; Walker vs. State, 176 Ind. 40; 9i5 X\ E. 3(53; Moore vs. Title Guaranty & Trust Oo., 151 Mo. App. 356; 131 S. W. 477; Amer- ican Bonding Co. vs. Pueblo Inv. Co., 150 Fed. 17; 80 C. C. A. 97; Turner vs. Xat. Cotton Oil Ct)., 60 Tex. Civ. App. 468; 109 S. W. 1112; Trustees Seventh Baptist Church vs. Andrew & Thomas, 115 Md. 536; 81 Atl. 1; Phoenix Mfg. Co. vs. Bogardus, 231 111. 528; 83 N. E. 284; Kuhl vs. Ohambcrlain, 140 Iowa 546; 118 N. W. 776; Daly vs. Old, 3'5 Utah, 74; 99 P. 460. 18 THE LAW OF SURETYSHIP. tion of the contract is not creating obligations by implication. "In guaranties, letters of credit, and other obligations of Sure- ties, the terms used and the language employed are to have a reasonable interpretation, according to the intent of the parties as disclosed by the instrument, read in the light of surrounding circumstances and the purposes for which it was made. . . . He is not Liable on an implied engagement, and his obligation cannot be extended by construction or implication, beyond the precise terms of the instrument by which he has become Surety. But in such instruments the meaning of written lan- guage is to be ascertained in the same manner and by the same rules as in other instruments; and when the meaning is ascertained, effect is to be given to it. ' ' "' When there is fraud, or mistake in the execution of the contract and the actual agreement and intention of the parties is not expressed, the contract may be reformed in equity upon parol proof like other written instruments, and enforced against the Surety and Guar- antor."* §18. Ambiguous words — how interpreted. If the language is ambiguous, and the exact meaning cannot be ascertained, it is the policy of the law to give to the eon- "3 Bellani vs. Freeborn, 63 N. Y. anty Co., 156 Mo. App. 109 ; 134 388; Wills vs. Ross et al., 77 Ind. 1. S. W. 18; Aetna Indemnity Co. vs. "The contract at a surety is to be Waters, 110 Md. 673; 73 Atl. 712; construed as any other contract — American Bonding Co. vs. Pueblo that is to say, according to the in- Inv. Co., 1'5C Fed. 17; 80 C. C. A. tent of the parties — and the rules 97; Hurlburt vs. Kephart, 50 Colo, for its construction are not to be 3i53; 116 Pac. 521; Martin vs. confused vrith the rule that sureties Whites, 128 Mo. App. 117; 106 S. are favorites of the law and have t^ gQg the right to stand upon the strict 64 Story on Equity, iSec. 164; terms of their obligations." McMul- Neininger vs. State, 50 0. S. 394; len vs. United States, 167 Fed. 460; 34 N. E. 633; Wiser vs. Blachly, i 93 C. C. A. 96; €tovey vs. SchiesB- ^f^"^- ^o' ^^"^ ' O^^stead vs. 01m- wohl, .0 Colo. 68; /l4 Pac. 292; S, .^1^ m'o°"98; ^^,^M^ Mystic Wwkers vs. United States et al., 1 N. J. Eq. 43; Clute vs Fidelity and Guaranty Co., 1,52 111. Knies, 102 N. Y. 377; 7'n. E. 181;" App. 223; Board of Education vb. ?,^"''^^T!? J^- Peterson, 154 111. United States Fidelitv and Guar- 419; 40 N. E. 359. THE CONTRACT. 19 tract a^ interpretation which will prevent, if possible, a for- feiture or nullification of the instrument, and two distinct theories of interpretation have been developed which are in hopeless discord. One view is that since letters of Guaranty and contracts of Surety are commercial instruments and gen- erally drawn in brief language, often loose in their structure, that it defeats the intention of the parties and renders such instruments unsafe as mediums of commerce to construe them with nice and technical care and that "It does not lie in the mouth of the Guarantor to say that he may, without peril, scatter amhiguous words, by which another party is misled to his injury, ' ' "' and hence the conclusion that ambiguous words with unascertained and doubtful meaning should be construed most strongly against the promisor and impose upon him any obligation consistent with the language employed, if the obligee shall assert and show that he acted upon such construction."" Opposed to this theory is the dictum of Chief Justice Mar- shall in which he holds "It is the duty of the individual who contracts with one man on the credit of another, not to trust to ambiguous phrases and strained constructions, but to re- quire an explicit and plain declaration of the obligation he is about to assume. ' ' *" This has been the basis of many holdings which adhere to the rule that ambiguous words of suretyship 65 Gates vs. Mc'Kee, 13 N. Y. 236. Co. vs. Pressed Brick Co., 191 U. S^ 66 Mason vs. Pritcliard, 12 East. 416-4215, holding, "If a person de- 227; Hargreave vs. Smee, 6 Bing. liberately contracts for an unoer- 244; Eindge vs. Judson, 24 N. Y. tain liability he ought not to com- 64 ; City Nat'l Bank vs. Phelps, 86 plain when that uncertainty becomes N. Y. 4S4 ; Lawrence vs. McCalmont certain." Town of Whitestown va. ct al., 2 How. 426 ; Douglas vs. Key- Title Guaranty and Surety Co., 131 nolds, 7 Peters 122; DTummond vs. X. Y.'S. 390; Small Co. va. Claxton, Prestman, 12 Wheat. 515; Menard ^ ^^\^F^- H''^'^ ^.f\->J'^ ''^^^^'^ „ __ _ _ . or,, T VS. Unjied States Jbidelity & Guar- vs. Scudder, 7 La.. An. 385; Lee vs. ^^^y (,^^ 239 111. 502; 88 N: E. 208; Dick et al., 10 Peters 493; Bright state vs. Tihe Blanchard Construc- vs. MoKnight, 1 Sneed (Tenn.) 108; tion Co., 91 Kan. 74; Lackland vs. Taussig et al., vs. Eeid et al., 145 Eenshaw, 165 S. W. 314; Shreffler III. 48'«; 3. K E. .18; Sather S' 6^^^^'. ^It^ ^6^2^^^' = '^ "^- Banking Co. vs. Briggs Co., 138 Oal. 67 Russell vs. Oark, 7 Oi-anoh 69. 724; 72 Pac. 3i58; see also Guaranty 20 THE LAW OF SURETYSHIP. should be given such construction as will impose the least liabil- ity consistent with the langiiage used."' §19. Estoppel of promisor to deny recitals in the contract. A promisor in suretyship will be held strictly to the recitals in his contract and even though the recitals are not true in fact, he is nevertheless estopped from denying them.^' This rule does not operate to estop the promisor from denying the -validity of the entire contract, or from claiming the acts recited to be void/" Neither will he be estopped from denying recitals which are inserted by fraud,'^ nor will he be estopped from asserting that the transaction was illegal,'^ but he will be estopped from denying the jurisdiction of the court in actions upon judicial bonds.''^ 68 Nicholson, va. J'aget, 5 C. & P. 366; Cutler vs. Ballou, 136 Mass. 337; Kay vs. Groves, 6 Bing. 276; White vs. Reed, 15 Oonn. 457; Al- dricks vs. Higgins, 16 Serg. ■& R. 212; Rirdsall vs. Heacock, 32 0. S. 177; Morgan vs. Boyer, 39 O. S. 324: Gard vs. Stevens, 12 Mich. 292; American Surety Oo. vs. Koen, 49 Tex. Civ. App. 98: 107 S. W. 9'38: Board of Education vs. Fudge, 4 Ga. App. 637; 68 S. E. 154; Minor vs. Woodward, 179 Mo. App. SB'S; 166 S. W. 865. «s Bruce vs. U. S., 17 How. 437 ; Washington Ice Co. vs. W«bster, 125 U. S. 426; 8 S. Ot. 947; Mon- teith vs. Commonwealth, 15 Gratt. 172; Brockway vs. Petted, 79 Mich. 620'; 45 N. W. 61 ; Borden et al. vs. Houston, 2 Tex. 594; May vs. May, 19 Fla. 373; Cocks vs. Barker, 49 N. Y. 107; Harrison vs. Wilkin, 99 N. y. 412; Hundley vs. Filbert, 79 Mo. 34; People vs. Huson, 78 Oal. 154; 20 Pac. 369; Kelly et al. vs. The State, etc., 25 0. S. 567; Gray vs. The State, 78 Ind. 68 ; White vs. Weatherbee, 126 Mass. 4'50; Wil- liamson vs. Woodman, 73 Me. 163; State of Kansas vs. United States Fidelity and Guaranty Co., 81 Kan. 660; 106 Pac. 1040; Indemnity Oo. vs. Waters, 110 Md. 673; 73 Atl. 712; Red Wing Sewer Pipe Co. vs. Donnelly, 102 Minn. 192; 113 N. W. 1. 70 Thomas vs. Burrus, 23 Miss. 550; Tinsley vs. Kirby, 17 S. C. 1 ; Tucker et al. vs. State, etc., 11 Md. 322. 71 Henry vs. Sneed, 99 Mo. 407; 12 S. W. 663. • 72 Daniels et al. vs. Barney, 22 Ind. 207 ; Thorne vs. Travellers Ins. Co., 80 Pa. St. 15; Ley vs. Wise, 16 La. An. 38; Leckie vs. Scott (gam- bling debt), 5 La. 631. 73 Carver vs. Carver et al., 77 Ind. 498; Harbaugh et al. vs. Alhertson, 102 Ind. 6)9; IN". E. 2i9«; Pannills Admr. vs. Calloway, 78 Va. 387; Hine vs. Morse, 218 U. S. 49'3. Holding, "Having obtained the trust and confidence of the court by aid of the security afforded by the sol- emn obligation to faithfully execute the order of the court and to pay into court the proceeds of the aale, which he undertook to make, neither the trustee so appointed, nor the surety for his performance of the trust, are in a situation to deny the regularity of the transaction." Contra, — Crum vs. Wilson, 61 Miss. 233. THE CONTEACT. 21 §20. Incompleted contracts of suretyship. When the contract of suretyship is incomplete, by the omis- sion of wortis necessary to state the understanding of the par- ties, or by failure to fill out blanks where printed forms are used, such contracts if they are to be completed at all must either be brought within the ordinary rules of agency, whereby some one acts for the promisor, or must fall within some of the fixed rules of the law operating upon such incomplete writ- ings. In the absence of these controlling features, an incompleted contract will not be binding since in order tc make it speak the truth, a material alteration must take place, which will operate to discharge the promisor,'* even though the alteration expresses the real understanding of the parties, and even in cases where the contract in its altered condition is an advantage to the promisor.'" If the contract is expressed by a blank indorsement, the generally accepted rule is that it may be completed either by operation of the rules of the law merchant, resulting in cer- tain presumptions, or by the production of extrinsio proof whereby the understanding of the parties is disclosed, and when so completed will be given force and effect." This position does not impugn the doctrine thjat written contracts are not to be varied by parol. " There is evidence of a contract of some kind, but its particular terms are not given on the paper but are left to be ascertained by parole." " If the promisor signs an incompleted instrument, and delivers it in that condition he aiithorizes, by implication, the* beneficiary of such instrument to fill in all blanks which by being filled will in no way enlarge or restrict the liability on the undertaking, as, for instance, the 'iFitzgeraJd vs. Staples et al., S. W. 608; U. S. vs. O'Neill, 19 Fed. 88 111. 234; Thompson vs. Massie, Eep. 567. 41 0. S. 307; Johnston, Uecr. vs. '^ Bethune vs. Dozier, 10 Ga. 235; May et al., 76 Ind. 293; Neff vs. Portage Bank vs. Lane, 8 0. S. 405; Horner, 63 Pa. St. 327; Marsh vs. Anderson vs. Bellenger & Ralls, 87 Griffin, 42 Iowa 403; Rhea vs. Gib- Ala. 334; 6 South. 82. son's Exr. 10 Gratt. 215 ; Wegner '"> Ante See. 8. vs. The State, 28 Tex. App. 419; 13 " Barrows vs. Lane, 5 Vt. 161. 22 THE LAW OF SUEETYSHIP. omission of the sureties' names from the body of a bond. If, however, the amount of the penalty is left blank the omis- sion cannot be supplied without the express consent of the obligor." Also the filling in of the date blank in a bail bond fixing the time for the appearance of the accused was held to be an unauthorized act, and that the contract could not be completed in this respect without the express consent of the obligor. '" If the promisor signs an instrument in blank, and intrusts it to the principal to complete, and authorizes him to fill in such words as will express the understanding of the parties, the promisor will be boimd, even though the contract when completed does not express the understanding of the parties, and enlarges the liability, providing the creditor who accepts has no knowledge of the change.*^ §21. Statutory requirements. Judicial bonds and bonds of public officers are regulated by statute, and the* requirements as to form, penalty, qualification of Sureties and approval are generally stipulated in the statutes. These provisions, however, are merely directory and for the benefit of the beneficiary of the bonds, and the Sureti* will be '8 Potter vs The State, 23 Ind. vs. The People, 95 111. 249; White 550; Nell vs. Morgan et al., 28 111. Y?" D"ggan, 140 Mass 18; Green ' , ° ,,,„,, County vs. Wilhite, 29 Mo. App. 524; Danker vs. Atwood, 119 Mass. 459. gtahl vs. Berger, 10 Serg. & 146; Howell vs. Parsons, 89 N. C. Rawle 170; Ex Parte Kerwin, 8 230; Seheid et al. vs. Leibshultz Cow. 118. et al.i 51 Ind. 38; McLain vs. Sim- ^/^ ^° wliether the delivery of a - i „~, rs o .0. T. J. -J blank suretyship instrument by the mgton, 37 0. S. 484; Partridge vs. promisor raises an implied agency Jones, 38 0. S. 375 ; Building Assn. in the principal to fill in any blank, vs. Cummings, 45 0. S. 664; 16 N. and so bind an innocent creditor, jf oA-i see South Berwick vs. Huntress, 53 \Tk' .■ X,- 1. ^ in.* Me. 89; State vs. Pepper, 31 Ind. 78 Austin vs. Richardson, 1 Gratt. ^g 310; Famulener vs. Anderson et al., A party signing a guaranty of 15 0. S. 473; Copeland & Brantley the payment of a draft or bill has K. Cunningham, 63 Ala. 394; *?^ 'JS^* *" impose, as a condi- fty. 1, „„ w„i,T„ oA Til om *'°" "-o "S acceptance and binding Church vs. Noble, 24 111. 291. f^^ee on him, that a certain othe? Contra — State Lunatic Asylum person named shall become his co- vs. Douglas, 77 Mo. 647. guarantor, and its acceptance by soWegner vs. State, 28 Tex. App. ^^f. payee with notice of the con- .,„ 100 w „no dition will create nof- liability on «,'r., 1 ;. 1. , n T ^"<=^ guarantor if the conditi^i is 81 Chalaron vg. McFarlane, 9 La, not performed. Belleville iS'avinea (Curry) 227; McCormick vs. Bay Bank vs. Bornman, 124 111 200 City, 23 Mich. 457; Cawloy et al. THBCOKTKACT. 23 estopped from claiming a non-conformity to statute. If the statute requires the approval of the bond by a public officer, the Surety will not be discharged because the officer neglected his duty in this respect.^'' Neither will the failure to file the bond within the time prescribed by statute be a defense to the Surety.'" Nor a failure to have the bond signed by the requi- site number of Sureties.** Sureties will not be. bound, how- ever, in excess of the statutory demand, and when the penalty named is greater than that stipulated in the statuie the bond will be held only for the statutory requirement.*" §22. Contracts in suretyship executed by agents. The statutes of frauds in force in this country have gen- erally re-enacted the clause of the English statute which pro- vides that the writing whereby one is charged with the payment of the debt of anothei* may be signed by the party to be so charged or by " some other person thereunto by him lawfully authorized." The general rule of agency that whatever a person may lawfully do if acting in his own right and in his own name, he may delegate to an agent, *° would be sufficient to authorize the execution of a suretyship contract by an agent, but the delegated authority must be strictly followed.*^ Neither the principal nor the creditor can act as agent of the promisor 82 Held vg. Bagwell, 58 Iowa 136 ; Comtro— Toles vs. Adee, 84 N. Y. 12 N. W. 226 ; People vs. Huson, 78 222 ; Roberts vs. The State, 34 Kan. Cal. 154; 20 Pac. 369; Tliomas vs. 151; 8 Pac. 246; in whieli it was Hinkley, 19 Neb. 334; 27 N. W. held that bonds containing a penal- 231; McCracken vs. Todd, 1 Klan. ty in excess of the statutory re- 148; Boone County vs. Jones, 54 quirement are wholly void. Iowa 699 ; 2 N. W. 987 ; 7 N. W. ss story on Agency, Sec. 6. 165; Mowbray vs. State, 88 Ind. 324. 87 Stevenson vs. Hoy, 43 Pa. St. Post Sec. 166. 191; Gates vs. Bell, 3 La. Ann. 62; 83 City of Chicago vs. Gage et al., Bryan vs. Berry, 6 Cal. 394; Sta- g's 111. 593; Kelly et al. vs. The vail vs. Commonwealth, 84 Va. 246; State, 25 0. S. 567. 4 S. E. 379; Dugan vs. Champion Post Sec. 168. Coal Co., 195 Ky. 821; 49 S. W. 958. 56rcLey"v?"e:bles''"f3'kebt-' "^''^ " ^""'^ '^''^P'^^^ '"^"'^ >« in ir XKT cAn' -nr ' r<, ' ' executed by one claiming to be at- 12 N. W. 840; Mears vs. Common- , . \. i j, , , wealth, 8 Watts (Pa.) 223. *°™'^y '" ^^^' *^« ^""'^ ™"«<^ *>« 8S U. S. vs. Ambrose, 2 Fed. Eep. accompanied by a power of attor- 532; State of Ohio vs. Findlay, 10 °ey showing authority. Anderson Ohio 51; State vs. Purcell, 31 W. vs. Southern Ry. Co., 9 Qa,. App. Va. 44; 5 S. E. 301. 199; 70 S. R. 983 25a THE IjAW of suretyship. §23a. The execution of the contract. The name of the promisor in suretyship must be affixed to the agreement, or to some memorandum thereof."' Partieo signing upon condition that others sign as principals, or co-sureties, will not be bound unless such condition is com- plied with, provided the obligee accepts the instrument with notice of such condition,"* or with knowledge of facts which put him upon inquiry," unless such condition is waived by the promisor, either expressly or by conduct amounting to estoppel."' 85 See Post Chapter II. 90 Taylor County vs. King, 73 la. 153; 34 N. W. 774; Rhode vs. Mc- Lean, 101 111. 467; Clark vs. Bryce, 64 Ga. 486; Tidball vs. Halley, 48 Cal. 610; Harris vs. Eegester, 70 Md. 10»; 16 Atl. 386; Board of Education vs. Robinson, 81 Minn. 305 ; 84 N. W. 105 ; Farmers Bank vs. Hunt, 124 N. C. 171; 32 S. E. 546; Columbia Ave. Bank & Trust Co. vs. King, 227 Pa. 308; 76 Atl. 18; Bel- den vs. Hurlbut, &4 Wis. 562; 69 N. W. 3'57 ; Lemp Brewing Co. vs. Secor, 21 Okl. 537; 96 Pac' 636; French vs. Hicks, 52 Tex. Civ. App. 427; 114 S. W. 691; Sellers vs. Ter- ritory, 121 P. 228; 32 Okl. 147. Contra — Surety discharged even though creditor had no knowledge of conditions. Union Pacific Tea Co. vs. Dick, 89 Atl. 204; 87 Conn. 711. »7 Crawford vs. Owens, 79 S. C, 59; 60 S. E. 236; Benton Co. Sav Bank vs. Boddicker, 117 la. 407 90 N. W. 822; Baker Co. vs. Hunt ington, 46 Ore. 275; 79 Pac. 187 Husak V. Clifford, 179 Ind. 173; 100 N. E. 466; Goodyear Dental Vulcanite Co. vs. Bacon, 151 Mass. 460; 24 N. E. 404; French v. Hicks, 52 Tex. Civ. App. 427; 114 S. W. 691; People vs. Sharp, 133 Mich. 378; 94 N. W. 1074; American Ra- diator Co. vs. American Bonding Co., 72 Neb. 100; 100 N. W. 138; Baker County vs. Huntington, 47 Ore. 275; 83 Pac. 532. Contra — Where the principal named in the bond would be liable in the absence of the bond for the acts or omissions which constitute the breach in the suit, the failure of the principal to execute the bond will not discharge the surety who has signed it and permitted it to be delivered to the obligee. Empire State Stirety Co, vs. Carroll Coun- ty, 194 F. 593; Star Grocer Co. vs. Bradford, 74 S. E. 509; 70 W. Va, 496; Title Guaranty & Surety Co. vs. Schmidt, 213 Fed. 199. 98 Middleboro Nat'l. Bank vs. Richards, 55 Neb. 682; 76 N. W. 528; White S. M. Co. vs. Saxon, 121 Ala. 399; 25 So. 784. THE CONTRACT. 256 The condition of co-suretyship may be satisfied, although the parties sign different instruments, provided they relate to the same liability."' An agreement to become surety does not amount to a contract of suretyship.^"" If all persons named in the body of the instrument do not sign, it is held to be sufficient to put the obligee upon inquiry. i>»Snow vs. Brown, 100 Ga. 117; loo Vogelsang vs. Taylor (Tex. 28 S. E. 77; Rudolf vs. Malone, 104 Civ. App.), 80 S. W. 637; Teasley Wis. 470; 80 N. W. 743. vs. Ray, 9 Ga. App. 649; 72 S. E. 43. y CHAPTER IL THE STATUTE OF FRAUDS- Sec. 24. The Purpose of the Statute of Frauds. Sec. 25. The English Statute. Sec. 26. Meaning and Scope of the Word "Agreement." Sec. 27. Same Subject Continued. American Decisions. Sec. 28. The "Memorandum or Note." Sec. 29. Same Subject Continued. Sec. 30. The Signature to the Memorandum. Sec. 31. "Special Promise"— To whom Made. Sec. 32. Same.— Applied to Contracts of Indemnity. Sec. 33. Same Subject Continued. Sec. 34. Same Subject Continued. American Decisions. Sec. 35. All Contracts of Suretyship are Within the Statute of Frauds. Sec. 36. Credit Given Wholly to the Promisor. Sec. 37. Joint Liability of Promisor and Aiiother. Sec. 38. Discharge of Original Debtor. Sec. 39. Consideration Beneficial to Promisor. Co-Existing Liability of Another is not Always a Test of Suretyship. Sec. 40. Promise to pay Debt of Another out of Property of Debtor in Promisor's Hands. Sec. 4L Release of Liens and Securities by Creditor as Basis of Orig- inal Promise. Sec. 42. Promise to Pay Pre-Existing Liability of Promisor not Within the Statute. 5ec. 43. Assumption of Vendor's Debt as Part of Purchase Price not Within the Statute. Sec. 44. Contract of Del Credere Agent not Within the Statute. Sec. 45. Pleading Transactions Within the Statute. Plaintiff's Alle- gations. Sec. 46. Pleading Statute as a Defense. Sec. 47. Lex Fori. The Statute of Frauds Remedial. §24. The purpose of the statute of frauds. The purpose of the modern legislative enactments of the Statute of Frauds is doubtless more extensive and more practi' 36 . THE STATUTE OF FRAUDS. 2'^ cal than that recited in the original English statute which was there expressed as the "prevention of many fraudulent prac- tices, which are commonly endeavored to be upheld by perjury and subornation of perjury." It is not merely to prevent false swearing that such statutes are now considered useful, but the deliberate judgment and experience of men has established the necessity of reducing certain transactions to writing in order to secure justice by excluding the uncertain and defective recollection of witnesses. It was conceived that important questions relating to land titles, involving agreements to convey or incumber, agreements charging one personally who occupies a trust position, agree- ments not to be performed for a long time in the future, and agreements to pay the debt of another should not be established by any evidence that might be supplied through perjury, misun- derstanding of spoken words or innuendo.* The practical wisdom of this position is corroborated by the universal acceptance of the English Statute of Frauds in all places where the common law prevails and by the persistent spirit with which the statute has been judicially administered. It has thus become an axiom of Suretyship that such con- tiacts must always take into account the provisions of the Statute of Frauds and so be reduced to writing. §25. The English Statute. The English Statute of Frauds . is supposed to have been * "The general object of the Stat- cases, unless there was a memo- ute was, to take away the tempta- randum in writing. The object of tion to commit fraud by perjury in both was, that the ground and important matters, by making it foundation of the action should be requisite in such cases for the par- in writing and should not depend ties to commit the circumstances to on parol testimony." Saunders vs. writing. The particular object of Wakefield, 4 Barn. & Aid. 595, Hol- the fourth clause was to prevent royd, J. any action being brought in certain 28 THE LAW OP SUEETTSHIP. drafted by Lord Hale ^ although not passed " by tJie House of Lords until after his death.' That part of the Statute relating to Suretyship reads as follows : " No action shall be brought whereby to charge the defendant upon any special promise to answer for the debt, default or miscarriages of another person ; unless the agreement upon which action shall be brought, or some memorandimi or note thereof, shall be in writing, and signed by the party to be charged therewith, or some person thereunto by him lawfully authorized." * This has been sub- stantially re-enacted in all the states. The most notable ex- ceptions being the statutes in Alabama, California and Dela- ware, which provide that the agent who signs his principal's name to an obligation within the statute must be authorized in writing so to do,* and the provision of the Kentucky Statute which provides that an agent cannot bind his principal as a Surety unless his authority is in writing," while in Nevada and Wyoming no provision appears to be made for the execution by an agent, of the suretyship contract vrithin the statute.* A further variance from the English statute may be noted in that a number of the states have enacted that verbal agree- ments to pay the debt of another are wholly " void," as dis- tinguished from the English statute which provides merely that iWain vs. Warlters, 5 East 16; 3 29 chas. 11, Chap. 3, Section 4. but see Ash vs. Abdy, 3 Swanst. The English statute is in force in 664, where Lord Nottingham says: the District of Columbia. Huntley "I have reason to know the mean- vs. Huntley, 114 U. S. 394; 5 S. Ct. ing of this law for it had its first 884. rise from me, who brought the bill No statute has been enacted in into the Lord's House, though it Maryland and New Mexico, and the afterwards received some additions English statute ' is considered in and improvements from the Judges force as a part of the Common Law. and Civilians." It may be doubted Sibley vs. Williams, 3 Gill. & Johns, whether this was intended as a (Md.) 62; Childers vs. Talbott, 4 claim for the authorship of the bill N. M. 168; 16 Pac. Rep. 275. or merely that he introduced it in » Alabama Code, See. 2152; Cali- the House of Lords. fornia Code, Sec. 2309. 2 The exact date of the passage of ^ Kentucky Statutes, Sec. 482. the act cannot be definitely ascer- "Statutes of Nevada, Sec. 263a; tained, but the bill recites that it Revised Statutes of Wyoming, Sec goes into effect June 24, 1677. 2953. THE STATUTE OF FRAUDS, 29 " No action shall be brought." ' The English statute and those that follow it in this respect operate only on the remedy, a ver- bal contract being entirely valid,* but by reason of the statute not enforceable by action. §26. Iffeaning and scope of the word " agreement." The English statute is loosely constructed, and although its ambiguities are patent, and became the subject of controversy in the very beginning, yet the Statute was almost literally trans- planted in many states, thus creating new fields of disputation that might easily have been avoided by a revision. The Statute reads that no action shall be brought on the " promise " unless the " agreement " or " some memorandum or note thereof " is in writing. It is, therefore, important to 'Alabama Code, Sec. 2152; Cali- fornia Civil Code, Sec. 1624; Colo- rado Statutes, See. 2025; Montana Code, Sec. 223; Michigan Compiled Laws, Sec. 9515; Nebraska Statutes, Chap. 32, Sec. 8; New York Jlevised Statutes, Part II, Chap. 7; Ne- vada Statutes, Sec. 2630; North Dakota Civil Code, See. 3887; Ore- gon Annotated Laws, Sec. 785; Utah Laws, Sec. 2467; Washington Gen. Statutes, Sec. 2432; Wiscon- sin Statutes, Sec. 2307; Wyoming Revised Statutes, Sec. 2953. 8 Stone vs. Dennison, 13 Pick. 1 Beal vs. Brown, 13 Allen 114 Ryan vs. Tomlinson, 39 Cal. 639 Simpson vs. Hall, 47 Conn. 417. In New York, the statute ex- pressly provides that contracts named in the statute shall be void. " A contract void by the statute is void for all purposes. It confers no right and creates no obligation as between the parties to it; and no claim can be founded upon it as against third persons." Andrews, J. Dung vs. Parker, 52 N. Y. 496. But see Crane vs. Powell. 139 N. Y. 379; 34 N. E. 911, where it is held that verbal contracts within the provisions of the statute may be enforced providing the defendant does not specially plead the statute. In no other state where the Court has so held does the statute read as in New York. In other jurisdic- tions where failure to plead the statute is held a waiver, it is put upon the ground that the statute does not make the contract void but merely prohibits action being main- tained upon it. Child vs. Pearl, 43 Vt. 224 ; La Du-Kiug Mnfg. Co. vs. La Du, 36 Minn. 473; 31 N. W. 938; Lowman vs. Sheets, 124 Ind. 416; 24 N. E. 351. Beard vs. Converse, 84 111. 515, Scott, J. " The general rule, if a party would avail of the Statute of Frauds as a defense, he must plead it,- has always been adhered to in this State. The reason for the rule is obvious, for a contract within the Statute of Frauds is not absolutely void, but only voidable, at the election of the party against whom it is sought to be enforced." 30 THE LAW OF SUEETYSHIP. know what the word " agreement " means in order to determine what is necessary to be in writing. A promise may be the result of an agreement, something which grows out of an agreement. An agreement moreover, etymologically as well aa by proper legal construction, seems to contemplate a compact by two or more persons. " An agreement is aggregatio men- tium, viz. when two or more minds are united in a thing done, or to be done. A mutual assent to do a thing." " It is mani- fest, therefore, that such a construction might be given the word •' agreement " as used in the Statute, which would require tne writing not only to express mutuality, but also to set out the entire bargain, including the consideration for the promise. Such was the conclusion' reached in Wain vs. Warlters ^^ de- cided in 1804, the court holding that " promise " and " agree- ment " did not each mean the same thing, and that it was- not sufficient to satisfy the requirements of the Statute that the unilateral " promise " of the Surety was in writing but that the terms under which he signed, the consideration, for his promise, must be in writing. The same question was again elaborately discussed by the Judges of the King's Bench in Saunders vs. Wakefield,^^ and the holding adhered to and there- after accepted as the English law ^^ until by the Mercantile Law Amendment ^^ in 1856 it became unnecessary to express the consideration in writing. §27. Same subject continued. — American decisions. There is no uniformity of holding in this country. In some states the legislature has obviated the difficulty by omitting the word " agreement " altogether ^* from the suretyship clause of the Sta^iute, resulting in such case in the holding that the Com. Dig., Tit. Agreement, A, 1. Williams, 5 Barn. & Ad. 1109 10 5 East 10. . Clancy vs. Piggott, 2 Ad. & Ell. 473 11 4 Barn. & Aid. 595. Raikes vs. Todd, 8 Ad. & Ell. 846 12 Jenkins vs. Reynolds, 3 Brod. Sweet vs. Lee, 3 Man. & G. 452 •ft Bing. 14; Morley vs. Boothby, 3 Bainbridge vs. Wade, 16 Ad. 4 Ell. Blng. 107; Hawes vs. Armstrong, 1 N". S. 89. Bing. (N. C.) 761; Cole vs. Dyer, is 19 & 20 Vict. Chap. 97. 1 Cromp. &■ Jerv. 461 ; James vs. " California Civil Code, Sec. 1624. THE aTATUTJi Oil' l-'itAUDS. . 31 promise only need be in writing and that the " agreement " or the terms or consideration upon which the promise is based may be shown by parol. Also in quite a number of the states, the Statute has coupled the words promise and agree- ment in such a way that the courts in those states have appar- ently no difficulty in holding that the promise alone need be in writing." But the Statute in some states adopts literally the English provision and recites, without the alternative clause, that the " agreement " must be in writing. This puts upon the courts the direct responsibility of determining whether they will adopt the English construction or sustain the more diffi- cult position that notwithstanding the language used in the Statute it is the promise only and not the " agreement " that must be in writing. In Massachusetts the court held that " agreement " was used in the Statute in a popular and not in a technical legal sense and that the word should be treated as synonymous with prom- ise, and that if the promise is in writing without any recital iu the writing of the consideration upon which the promise is founded there is a sufficent compliance with the Statute.^" 15 The statute of Frauds in Ten- quires that the agreement expreaa nessee reads: "No action shall be the ponsideration, Sec. *289. brought whereby to charge the de- Kentucky — -Ratlifif vs. Trout, 6 J, fendant upon any special promise J. Marsh. 605. to answer for the debt, default or Florida — Dorman vs. Bigelow, 1 miscarriage of another person un- Fla. 281. less the promise or agreement, upon is Packard vs. Richardson, 17 which such action shall be brought, Mass. 121 (1821). The statute in or some memorandum or note there- Massachusetts now provides : " The of, shall be in writing, etc." Sec. consideration of such promise, con- 3142, Code of Tennessee; Taylor vs. tract or agreement need not be set Ross, 3 Yerg. 330 ; Campbell vs. forth or expressed in the writing Findley, 3 Humph. 330. signed by the party to be charged The same form of the statute is therewith but may be proved by any the basis of a similar holding in other legal evidence." It has often Virginia — Violett vs. Patton, 5 happened in the development of our Cranch (Ij. S.) 142. law that a "judicial repeal" of an Mississippi — Wren vs. Pearce, 4 existing statute has shortly been Smed. & M. 91. followed by legislative action where- Alaiama — Thompson vs. Hall, 16 by the statute is made to conform Ala. 204. The Ala. Code now re- to the view of the Court. Other 32 THE LAW OF SUKBTY8HIP. In New York, however, the English holding received the sanction of the courts,^' but it being somewhat doubtful wheth- er such holding would stand, and the decisions in New York becoming conflicting,^* the earlier opinions were vindicated by amendment to the Statute requiring the consideration to ex- pressly appear in the writing.^" But in 1863, the Statute was again amended by restoring the Statute to its original English form and so restoring the original rule, that, although there need be no definite expression of consideration in the writing, yet all the substantial and material requirements of the contract must appear in the writing from which a consideration can at least be implied.^" In Illinois and Indiana,'^ although the courts followed the English construction and held that the consideration must be expressed in writing, the legislature subsequently repudiated the principle and provided that the consideration may be shown by parol. The conflicting opinions in American courts upon this subject, as indicated by the citations made in this section, have a practical importance in connection with the fact that States besides Massachusetts have, i» Brewster vs. Silence, 8 N. Y. however, repudiated the doctrine of 207. Wain vs. Warlters, without modi- ^o Drake vs. Seaman, 97 N. Y. lying their statute. 234; Barney vs. Forbes, 118 IST. Y. Connecticut — Sage vs. Wilcox, 6 580 ; 23. X. E. 890. Conn. 81. 21 Patmor vs. Haggard, 78 111. Maine — Levy vs. Merrill, 4 Greenl. 607 ; Gregory vs. Logan, 7 Blackf . 180; Gillighan vs. Boardman, 29 (Ind.) 112. Me. 79. The English interpretation . that Missouri— Besin vs. Valle, 2 Mo. the "agreement" showing the con- 126; Halsa vs. Halsa, 8 Mo. 303. sideration must be in writing has North Carolina — Miller vs. Irvine, been followed in 1 Dev. & Bat. Law (N. C.) 103; Ash- New Hampshire — ^Neelson vs. ford vs. Eobinson, 8 Ired. Law, 114. Sanborne, 2 N. H. 413; Underwood Ohio — Eeed vs. Evans, 17 0. 128. vs. Campbell, 14 N. H. 393. Pennsylvania — Moore vs. Eisa- New Jersey — Laing vs. Lee 20 man, 201 Pa. 190; 50 Atl. 982. N. J. Law, 337. Vermont — Smith vs. Ide, 3 Vt. Delaware — Weldin vs. Porter 4 290; Patchin vs. Swift, 21 Vt. 292. Houst. 236. 1' Sears vs. Brink, 3 Johns. 210; Marylanct-~-B.utton vs. Padgett, Kerr vs. Shaw, 13 Johns. 236. 26 Md. 228; Elliott vs. Giese, 7 18 Leonard vs. Vredenburgh, 8 Harr. & J. 457. Johns. 29. Georsrta— Hargroves vs. Cooke, 15 Ga. 321. THE STATUTE OF FRAUDS. 33 tlie Statute of Frauds in most jurisdictions affects merely the remedy ^^ and that the Lex Fori will be enforced whatever the interpretation in the state where the contract is made.^' , i/ §28. The "memoranduin or note." An oral promise to pay the debt of another will be binding providing the promisor or his agent affixes his signature to some written " memorandum or note " of the promise. This mem- orandum is not necessarily the contract itself. It may be mere- ly preliminary to the contract, and set out the terms upon which the parties finally agree. If the mem^orandum is in writing the " agreement " may rest in parol, and of course, if the con- tract or agreement is in writing, there is no necessity for a written memorandum. So that a mere proposal to contract in suretyship which is in writing, will satisfy the Statute of Frauds, even though the contract or agreement finally entered into is verbal ; and such verbal contract may be enforced. It was held that a resolution of a board of directors of a railway company duly signed by the secretary, setting out the terms upon which the railway company proposed to contract, which terms were thereafter verbally accepted and agreed to by the parties to whom they were delivered, brought the trans- action within the provisions of the Statute and that the mem- orandum being in writing, the subsequent agreement, though verbal, could be enforced.^* 22 Ante Sec. 23. the party to be charged within the 23 Post Sec. 47. meaning of the Statute of Frauds." 2* Himrod Furnace Co. vs. The See also Eeuss vs. Picksley, L. R., Cleveland & Mahoning Railroad Co., 1 Ex. 342; .Stewart vs. Eddowes, L. 22 0. S. 451. R., 9 C. P. 211; Sanborn vs. Flag- In Argus Co. vs. Mayor of Al- ler, 9 Allen 474; W. U. Tel. Co. vs. bany, 55 N. Y. 495, the Common C. & P. R. R. Co., 86 111. 246; Vind- Council passed a resolution which quest vs. Perky, 16 Neb. 284; 20 N. was duly engrossed upon the min- W. 301; Howe vs. Watson, 179 Mass. utes of its proceedings and signed 30; 60 N. E. 415; Willis vs. Ellis, by the clerk. The resolutions set 98 Miss. 197; 53 So. 498; Friendly out terms and conditions for the vs. Elwert, 57 Ore. 599; 112 P. 1085. publication of the proceedings of Contra — Linn vs. McLean, 85 Ala. the Council and thereafter a verbal 250; 4 So. 777; Koch vs. Williams, contract was made for the printing 82 Wis. 186 ; 52 N. W. 257. in accordance with the terms of the Sb also if the proposal to contract resolution. The contract by its is verbal, but the acceptance is in terms was not to be performed writing, the contract will be en- within a year but it was held "Such forceable under the statute. Troy resolution constitutes a note or Fertilizer Co. vs. Logan, 96 Ala. 619; memorandum in writing signed by 12 So. 712. 34 THE LAW OF SURETY SHIP. Again parties agree verbally to exchange pieces of land which they each respectively own, a difference in cash to be paid by one. This party gives his check to the other in part payment and takes a receipt which recites the terms and conditions of the transaction. It was held that such verbal contract was made valid under the Statute by the memorandum in writing as evidenced by the check and receipt. ^° The Statute does not require the " memorandum " to be signed by both parties. It has been urged that the Statute does not contemplate the making of an instrument which can not be enforced against the other party, because not signed by him, and which creates merely an optional liability against the one who signs,^° but such a position is not in accord with the very explicit language of the Statute. Furthermore, it is not the " memorandum or note " which constitutes the agree- ment by which the parties are bound. The unilateral written memorandum being merely the instrument whereby the statute is satisfied, without which the contract cannot be enforced. But if it be true that the memorandum lacks the element of mutuality necessary to a binding compact, the party who asserts a legal right upon such memorandum by bringing action upon it, thereby supplies such deficiency. §29. Same subject continued. It is not necessary that the " memorandum or note " should be all upon one paper. Two or more papers taken together may 2B Raubitsehek vs. Blank, 80 N. In Bailey vs. Sweeting, 9 C. B. N. Y. 478. S. 843, the original transaction was It is clear that the statute does an oral agreement voidable by the not require the contract to be in statute: subsequently the promisor writing if the evidence of the con- agreed by letter to pay the debt and tract is in writing; yet the memo- the letter was held sufficient as a randum differs from mere evidence memorandum to satisfy the statute. in one important respect. It can- See also Townsend vs. Hargraves, not be used unless in existence be- 118 Mass. 325. fore the action is brought. Bill vs. 26Laurenson vs. Butler, 1 Sch. & Bament, 9 M. & W. 36. Although Lef. 13, per Lord Redesdale. See retroactive effect may be given the Justice vs. Lany, 42 N. Y. 495, for memorandum so as to validate a a very full discussion of the views prior oral agreement. expressed by Lord Eedesdale. THE STATUTE OF FRAUDS. 35 constitute the " memorandum " and it is sufficient if one of the papers is signed by the party to be charged, providing the one which is signed incorporates by reference the other papers.''' A different question arises where no reference is made in the sigTied memorandum, and the connection with other un- signed papers must be shown by parol. To construe papers so connected as constituting together the memorandum required by the Statute would introduce all the mischief which the Statute was intended to prevent.^^ If, however, each of the papers considered is signed by the party to be charged, it is not necessary that they should specifically refer to each other and if by inspection and comparison, the coincidence of names, dates, amounts, and description of property indicate to a rea- sonable certainty that such papers are connected with the same transaction, they may be construed together for the purpose of establishing the memorandum required by the Statute. ^° The result of the authorities seems to be that the " memo- randum or note " need not be in such form as to constitute a =-Morton vs. Dean, 13 Met. 385; Jackson vs. Lowe, 1 Bing. 9; Do- bell vs. Hutchinson, 3 Ad. & Ell. 355; Scarlett vs. Stein, 40 Md. 512; Washington Ice Co. vs. Webster, 62 Me. 341; Williams vs. Morris, 95 tJ. S. 456. Where an unsigned paper is to be incorporated by reference it is held to be necessary that the unsigned paper be already in existence. In Wood vs. Midgley, 5 De G. M. & G. 41, the reference was to an agree- ment that vpas to be prepared and the Court held the paper could not be used as a part of the memoran- dum. See also Brodie vs. St. Paul, 1 Ves. Jr. 326. But see Jenkins vs. Harrison, 66 Ala. 345. 28 Salmon Falls Mnfg. Co. vs. Goddard (Dissenting opinion of Curtis, J.) 14 How. (U. S.) 446. The opinion of the majority of the Court in this case is clearly against the. weight of the authori- ties of this country and England and is discredited by a. more recent case in the same court. See Grafton vs. Cummings, 9« U. S. 100. Wiley vs. Eoberts, 27 Mo. 388; Nichols vs. Johnson, 10 Conn. 192 ; O'Donnell vs. Leeman, 43 Me. 158; Clark vs. Chamberlin, 112 Mass. 19; Ridgway vs. Ingram, 50 Ind. 145; Schafer vs. Farmers' & Me- chanics' Bank, .59 Pa. St. 144; John- son vs. Buck, 35 K J. L. 338; Parkhurst vs. Van Cortlandt, 1 Johns. Ch. 274; Patt vs. Gerst, 149 Ala. 287; 42 So. 1001; Mead vs. White, 53 Wash. 638; 102 P. 753; Ballantine vs. Yung Wing, 146 Fed. 621. 29Wilkinson vs. Evans, L. E., 1 C. P. 407; Ide vs. Stanton, 15 Vt. 686; Work vs. Cowhick, 81 111. 317; Thayer vs. Luce, 22 0. S. 62; Beck- with vs. Talbot, 95 U. S. 289 ; Peck vs. Vandemark, 99 X. Y. 29; 1 N. E. 41. 36 THE LAW OF STJKETYSHIP. contract, but must amount to written evidence of it, and this evidence is supplied in conformity to the Statute, whenever Jl the essential elements of the bargain can be deduced from the writing or from any number of writings signed by the party, the meaning of which can be ascertained to a certainty without resorting to oral proof. The Court may construe these writ- ings, but no substantive fact not stated in the writing can be supplied. §30. The signature to the memorandum. The Statute requires the memorandum to be signed. It may be signed by initials *" or by the mark of the party.^^ Even a printed signature is sufficient if affixed by authority, or if there is evidence of its adoption by the party to be charged."" It is not necessary that the signature be found at the foot of the writing. If the name is placed so as to authenticate the instru- ment as the act of the party, and is put there by the party himself or his duly authorized agent, it is immaterial whether it appears at the top, at the bottom or in the body of the -•writing. "^ Where the memorandum is in the form of a tele- gram, the signature upon the blanks used by the sender is suffi- cient,'* and the signature may be affixed by an agent constituted without writing,^" or if the agency is wholly unauthorized, a subsequent ratification will validate the signature. 80 Phillimore vs. Barry, 1 Camp. ss Evans vs. Hoare, L. R. 1 Q. B. 513; Salmon Falls Mnfg. Co. vs. 593; Hawkins vs. Chace, 19 Pick. Goddard, 14 How. (U. S.) 446; .502; McConnell vs. Brillhart, 17 Sanborn vs. Flagler, 9 Allen 474. 111. 354; 2 Smiths Leading Cases, 31 Schneider vs. Norris, 2 Maul & 249. Sel. 286; Morris vs. KnifiBn, 37 3< Goodwin vs. Francis, L. R. 5 C. Barb. 336. P. 295; Smith vs. Easton, 54 i\rd. 32Drury vs. Young, 58 Md. 546; 138; Brewer vs. Horst Lachmund The New York statute requires Co., 127 Cal. 643 ; 60 Pac. 418. the writing to be "subscribed." 3* Ante Sec. 22; Rutenberg vs. This has been interpreted to mean Main, 47 Cal. 213; Worrall vs. a manual writing of the name, and Munn, 5 N. Y. 229 ; Yerby vs. Grigs- that a printed signature is not suf- by, 9 Leigh 387; Conaway va, ficient. Vielie vs. Osgood, 8 Barb. Sweeney, 24 W. Va. 643. 130; Davis vs. Shields, 26 Wend. Contra — Bullara vs. Johns, 50 341. Ala. 382. THE STATUTE OP FRAUDS. 37 §31. "Special promise" — To whom made. A promise made to the debtor to pay his debt is tot within the statute and need not be in writing, although the statute does not in terms state to whom the promise contemplated by it is to be made, yet it is held to apply only to promises made to a person to whom another is answerable."" When one promises the maker of a note that he will pay jit for him, this is not a suretyship contract within the meaning of the statute. §32. Same — Applied to contracts of indemnity. The interpretation given by the courts in the citations of the preceding section, as to whom the promise must run, dis^ poses of the somewhat vexed question involved in Contracts of Indemnity. The latter undertaking is an engagement to make good or save another from a loss upon some obligation which he has or is about to incur to a third party and is not a promise made to one to whom another is answerable., In other words, the prom- ise is to the debtor and not to the creditor. There is no appar- ent difference in principle between a promise to a debtor to pay his obligation and a promise to indemnify him against it. If the promise is merely to indemnify another upon a lia- bility which he incurs to a third, there is very little, if any, conflict of authority but that it is not within the statute and so need not be in writing.^' The difficulty, if any, arises in those transactions involving In Alabama the Statute of Frauds requires the authority of the agent to be in writing. But see Caperton vs. Gray, 4 Yerg. (Tenn.) 563, where verbal authority to sign another's name as security for the costs was held in- sufiBcient. 36 Eastwood vs. Kenyori, 11 Ad. & Ell. 438; Beaman vs. Russell, 20 Vt. 205; Nelson vs. First National Bank, 48 111. 36; Meyer vs. Hart- man, 72 111. 442; Hargreaves vs. Parsons, 13 Mees. & Wels. 561; Crim vs. Fitch, 53 Ind. 214; Goetz vs. Foos, 14 Minn. 265; Shook vs. Vanmater, 22 Wis. 532; Colt vs. Root, 17 Mass. 229; Chapin vs. Lap- ham, 20 Pick. 467; Tighe vs. Mor- rison, 116- N. Y. 263; 22 N. E. 164; Hoyle vs. Hoyle, L. R. 1 Ch. 84; Enos vs. Anderson, 40 Colo. 395; 93 P. 475; Mize vs. Mashburn, 8 Ga. App. 408; 69 S. E. 316; Hedden vs. iStehueblin, 126 Mo. App. 478; 104 IS. W. 887. 37 Hull vs. Brown, 35 Wis. 652; Green vs. Brookins, 23 Mich. 48; Marcy vs. Crawford, 16 Conn. 549; Mays vs. Joseph, 34 0. S. 22; Lereh vs. Gallup, 67 Cal. 595 ; 8 Pac. 322 ; Ferrell vs. Millican, 156 S. W. 230; Partin vs. Prince, 75 S. E. 1080; 150 N. C. 553. Where a contract is strictly one of corporate fidelity guaranty in- surance, it would seem on principle that the Statute of Frauds is in- applicable to its oral undertaking, though such undertaking is within the letter of the law. There seems to be little direct adjudication on this subject. In Com. use of Ledford vs. Hinson, 143 Ky. 428; 136 S. W. 912; Ann. Cases 1912D, 291; L. R. A. 1917B, 139, the statute was held to apply. Control — Quinn-Shepherdson Co. vs. U. S. F. & G. Co., 142 Minn. 428 (1919) ; 172 N. W. 693. A contract of indemnity is dis- tinguishable from guaranty and suretyship in that it undertakes to save another from loss on some obligation to a third person and is not a promise to whom another is 38 THE LAW OF SUEETTSHIP. a fourth, party, and there is some confusion in this elassi of cases, which apparently results more from the reasoning of some of the decisions, than from any error in the conclusions reached. Thomas vs. Cook, decided in 1828, presented the question as to whether a verbal promise to indemnify a second party as Surety upon a bond of a third party, which bond was given by the third party to secure his debt to a fourth party, is an undertaking within the Statute of Frauds. It was held that the promise was not within the Statute of Frauds and need not be in writing, and such is the law of England today. This relation of the parties involves a contingent liability of the third party, the principal debtor, to his Surety, the second party, since if the Surety should pay the debt, his principal must indemnify him, and therefore, in a sense, the first three parties, as between themselves, form a suretyship relation, in- which the third party is principal, the second party the creditor, and the first party the promisor ; the undertaking of the prom- isor being that he will pay the second party if the third party does not respond to his implied liability. It may, therefore, be urged with some force that the promisee, the second party, relies upon two separate persons for his protection in this ar- rangement, who are concurrently liable to him; and this readily gives rise to the suggestion that the undertakings of these two parties are collateral, and hence covered by the statute. Such was the reasoning of Green vs. Cresswell, which overruled Thomas vs. Cook, but which was, in turn, repudiated by the later cases in England.^* §33. Same subject continued. The doctrine of Green vs. Cresswell would be unassailable, if the major premise upon which the decision rests was sound, namely, that the promisor's undertaking is collateral to a con- answerable. Hall vs. Equitable Dudlow (1874), L. R. 19 Eq. 198; Surety Co., 126 Ark. .53.5 ; 101 ,S. overruling Green vs. Cresswell. W. 32. A "guarantor" undertakes The determination of this ques- by separate, Independent agreement tion is dependent on whether the that another shall perform a duty agreement is an original and inde- to a third person and a "surety" pendent one, or whether collateral joins with another in agreeing with to the agreement of another person, him that he will perform his duty whereby the promise is to answer and all the parties are directly and for the debt or default of that other, primarily held for the performance. In the first case it is not within Ricketson vs. Lizotte, 90 "Vt. 386; the statute, in the second it is. 98 Atl. 801. Spear vs. Farmers' & Mechan. Bank, iSee Posten vs. Clem, 20T Ala. 156 111. 555; Richardson Press ysA 529; 78 So. 883; 1 A. (L. R. 383 Albright, 224 N. Y. 497. Whether (1918), fully annotated. a promise is original or collateral 38 Thomas vs. Cook, 8 Bam. & is a question of fact for the jurv. Ores. 728 (1828); overruled by Luck vs. Throop, 189 111. 127. Green vs. Cresswell (1839): 10 Ad. Stee also Poaten vs. Clem, 201 & Ell. 453'; Reader vs. Kingham, 13 Ala. .529; 78 So. 883; 1 A. L. R. C. B. N. S. 344 (1862); Wildes vs. 383, annotated note. THE STATUTE OF FRAUDS. 39 current liability of the third party to the promisee. If such is the relation of the parties, then it necessarily results, aa a fundamental proposition, that the promise is within the statute. The indemnitor, however, does not stand in such relation, since there is no obligation of the third party except as the result of a contract induced by the indemnitor's agreement. The implied liability of the third party to his principal had no independent existence at any time, and only became a liability as the legal consequence of a suretyship entered into in reliance upon the indemnity contract The statute only contemplates an obligation of the third party which exists independently of any contract between the first two. It does not follow from this that there must be an actual subsisting liability growing out of the principal contract before a collateral contract within the statute can be found, but the principal liability must either now exist, or come into exist- ence in the future, as an independent compact^ and not arise as a mere legal incident of the alleged collateral undertaking. A promise by A to indemnify^ B if the latter will sell mer- chandise to C is within the statut^, and is easily distinguish- able from a promise by A to indeiiinify B if he will become Surety for C. In the first case, the liability of C to B arises from the contract of sale, and may exist independently of any other contract made by B, although induced by the promise of A. In the latter case, the liability of to B arises merely as a legal consequence of a suretyship contract which B makes Avith the creditor' of C, and although induced by the promises of A, as in the first case, yet it does not exist independently of the other contract made by B. It is not the use of the word indemnity which determines the question ; there are contracts of indemnity which are within tJie statute, and also those which are without the statute, depend- ing whether or not the undertaking is concurrent with some other independent liability for the same debt to the same person. Such is the basis upon which the English cases now rest 40 THE LAW OF SUEETYSHIP. and it is believed upon which the conflicting American decisions are most nearly harmonized. §34. Same subject continued — American decisions. A large majority of the American courts now adopt the En- glish rule and hold that a promise of indemnity need not be in writing, even though a co-existing implied liability of anoth- er arises as a result of the transaction in indemnity.^" There is really no distinction in principle between the cases in which the promise is to indemnify another upon his sole contract of suretyship, and those eases in which the promisor is also a Surety, but agrees to indemnify his co-surety. For instance, where there is a statutory requirement for two Sure- ties upon a bail bond or a bond of a public officer, one who is about to sign as Surety promises to indemnify another if he will join him as co-surety, in order to meet the requirements of the statute. There will arise at once by operation of law an implied co-existent liability on the part of the principal to save harmless both of the Sureties, and the promise by the indemni- tor is, in a sense, a promise to protect his co-surety, if the prin- cipal fails to meet such implied liability, but the situation in this respect is not different from that which arises where the indemnitor is not a co-surety. In both cases, the implied liability of the principal does not 39 Jones vs. Bacon, 145 N. Y. 446; (Ga.) 294; Anderson vs. Spence, 72 40 N. E. 216; Mills vs. Brown, 11 Ind. 315; Ross vs. WoUenberg, 31 Iowa 314; Lucas vs. Chamberlain, Oreg. 269; 44 Pac. 382; Resseter vs. 8 B. Mon. (Ky.) 276; George vs. Waterman, 151 111. 169; 37 N. E. Hoskins, 30 S. W. Rep. (Ky.) 406; 875. Minick vs. Huif, 41 Neb. 516; 59 N. Contra — Draughan vs. Bunting, W. 795; Fidelity & Casualty Co. vs. 9 Ired. (N. C.) 10; Easter vs. Lawler, 64 Minn. 144; 66 N. W. White, 12 O. S. 219; Nugent vs. '143; Vogel vs. Melms, 31 Wis. 306; Wolfe, 111 Pa. St. 471; 4 Atl. 15: 'Aldrich vs. Ames, 9 Gray 76 ; Cor- Bissig vs. Britton, 59 Mo. 204 ; May telyou vs. Hoagland, 40 N. J. Eq. 1 ; vs. Williams, 61 Miss. 125 ; Simp- Garner vs. Hudgins, 46 Mo. 399; son vs. Nance, I Spears (S. C.) 4; Demeritt vs. Bickford, 58 N. H. Hartley vs. Sandford, 66 N. J. L. 523; Jones vs. Shorter, 1 Kelley 627; 50 Atl. 454; 55 L. R. A. 206. THE STATUTE OF FEATJDS. 41 exist as an independent undertaking but is merely a legal consequence of another contract. It is sometimes urged that a promise of indemnity to a co- surety need not be in writing because it is a promise to indem- nify against the promisor's own default, and, therefore, bind- ing, irrespective of the suretyship feature with which it is associated.*" While this may furnish an additional reason why the promise is not within the statute, it falls short as a dis- tinguishing reason with which to harmonize the conflicting deci- sions. If the argument is sound which supports the view that a promise by a stranger to the debt to indemnify a Surety is within the statute, then it also brings within the statute the promise to indemnify a co-surety for the promisor in the latter case, in any event, undertakes to indemnify against his own default only to the extent of his contributory share of the lia- hility, but as to the co-sureties' contributory share, the relation of the parties is exactly parallel with the position of the parties where the indemnitor is a stranger to the principal contract. §35. All contracts of suretyship are within the statute of frauds. There are no exceptions under the Statute of Frauds. A considerable number of undertakings have been held not to be within the Statute which have pointSi of resemblance to the contract contemplated by the statute. These analogous trans- actions include those which, although resulting incidentally in the promises to pay another's debt, yet are based upon some *o"A promise by a stranger to ently of the promise, any engage- the debt, to indemnify a Surety, is ment which he may make, that it prima facie within the statute, be- shall be paid, or that the Surety cause the principal is bound by an shall not be compelled to pay it, implied obligation tO' do what the will be regarded as contracted on promisor agrees to do expressly, his own behalf, and not for the debt and the promise is, therefore, really or default of another in the sense to answer for the default of the in which the term is used in the principal. When, however, the statute." 1 Smith's Leading Cases, promisor is directly or indirectly 8 Am. Ed. 538. aoisverable for the debt independ- Terrell vs. Maxwell, 28 O. S. 33&. 42 THE LAW OF SUEETYSHIP. special benefit to the promisor, or result in a cancellation or ex- tinguishment of the principal's debt, or arise out of a joint liability in which credit is given to both principal and promisor, or where sales are made wholly on the credit of the promisor. These and other contracts of similar character, to be hereafter noticed, fall entirely outside the purpose of the Statute and are not properly classed as exceptions to the rule established by the Statute. But every collateral undertaking to pay a co-existing debt of another person is within the express provision of the Statute, and must be in writing, whether such undertaking is in the form of the contract of a Surety, Guarantor or Indorser, and the fact that the liability of the promisor is co-extensive with the principal, and " original " in the sense that he is bound from the beginning, such as a ' Surety upon a note, does not take the transaction out of the Statute. §36. Credit given wholly to promisor. If A requests another to ship goods to B or perform service for B and charge to himself, and if the goods are shipped or the service performed upon the credit of A, it is not a suretyship contract and need not be in writing, because the necessary ele- ment of a co-existing liability of another being wanting there is no suretyship relation." The fact as to whom the credit was given which controls this class of cases is often difficult to determine. The expressions used by the parties, or the circum- stances under which the promise was made, may doubtless always be resorted to." If the vendor makes a charge in his books against the third party he will generally be estopped from claiming a sale on *iLoomis vs. Newhall, 15 "Pick. Commercial Co. vs. Midland Coal 159; Ueberroth vs. Eiegel, 71 Pa. Co., 41 Mont. 211; 108 P. 655; Har- St. 280; S'impson vs. Penton, 2 rison vs. Birrell, 58 Ore 410- 11 > Cromp. & Mees. 430; Gleason vs. P. 141; Atlas Lumber Co vs Flint Briggs, 28 Vt. 135; Faires vs. Lo- 20 S. D. 118; 104 N. W 1046 •' danc, 10 Ala. 50; Bugbee vs. Ken- Eubey Trust Co. vs. Weidner 174 dricken, 130 Mass. 437; Phelps vs. Mo. App. 692; 161 S. W 333-'Fitz- Stone, 172 Mass. 355; 52 N. E. 517;- gerald Spear Co. vs Kelly 81 X J Gallagher vs. McBride, 66 N. J. L. L. 6; 83 Atl. 491. " ' ' 360; 49 Atl. 582; Lusk vs. Throop. 42Dean vs. Tallman 105 Mass 189 111. 127; 59 N. E. 529; Smith 443; Cowdin vs. Gottgetreu 55 N vs. Miller, 152 Ala. 485; 44 So. Y. 650; Keate vs. Temple IB &P 309; Cauthron Lumber Co. vs. Hall, 158. 76 Ark. 1; 88 S. W. 594; McGowan THE STATUTE OF FEAUDS. 43 the credit of the promisor.*^ Even a presentation of the bill to the third party, although charged on the books to the promisor has been held to establish a collateral promise within the stat- ute.** But a charge upon the books to the promisor and the presentation of the bill to him, the property being delivered to the third party, is not of itself conclusive evidence of an inde- pendent credit to the promisor,*'* although such charges in the hooks -would be strong presumptive evidence that the goods ■were sold wholly on the credit of the promisor.*" §37. Joint liability of promisor and another. If a promisor has put himself in the position of an original purchaser by becoming jointly liable with the principal debtor to whom the goods were delivered, it is the undoubted policy of the statute not to require such contract to be in writing, although the promisor's liability thereby becomes co-existing and co-extensive with that of the principal. It is not necessary in order to make two persons original prcfmisors that they shall he under equal obligations to pay the debt as between themselves. One may be an accommoda- tion party as to the other and yet be an original debtor as to the creditor. A sale for the benefit of one on the joint credit of two is an original undertaking of both debtors even though the vendor fully understands that as between the debtors themselves, one *sMatson-vs. Wharam, 2 T. R. Ind. 595; Larson vs. Jensen, 63 80. In this case, the form of the Mich. 427; 19 N. W. 130; Cameron promise was "I will see you paid." vs. Haas Bros. Packing Co., 3 Ala. Such form would generally import App. 520; Repair vs. Krebs Lumber an original liability. Yet even this Co., 80 S. E. 140. presumption was held to be over- ** Larson vs. Wynian, 14 Wend. come by the entry in the books (N. Y.) 246. against the third party. Contra — Hermans vs. Lambard, Anderson vs. Hayman, 1 H. Bl. 21 Me. 308. 120; Hardman vs. Bradley, 85 111. is Walker vs. Richards, 41 N^. H. 162; Webb vs. Hawkins Lumber 388; Noyes vs. Humphreys, 11 Co., 101 Ala. 630; 14 South 407; Gratt. (Va.) 636; McGowan ICom- Langdon vs. Richardson, 56 Iowa mercial Co. vs. Midland Coal Co., 610; 12 N. W. 622; State Bank of 41 Mont. 211; 108 P. 655; Sliay vs. Pike vs. People's Nat. Bank, 118 Cruxton, 116 N. Y. Supp. 1123; .)7 N. Y. Supp. 641. So. 388. Contra — Lance vs. Pearce, 101 *« Ruggles vs. Gatton, 50 111. 412. 44 THE LAW OF SUEETYSHIP. is acting merely to secure credit for the other. In reference to all such cases, the authorities are uniform.*^ §38. Discharge of original debtor. A contract by the promisor to pay the debt of another on the condition that the creditor cancel or extinguish the claim against the principal debtor, is not mthin the statute and need not be in writing. This rests upon the same reason as the caseH in which credit is wholly given to the promisor, namely, that the fundamental co-existing liability of another is wanting, without which suretyship does not arise. If A says to the creditor, " I will pay to you in 30 days B's deM now due, providing you will now execute to him a receipt in full," it raises an original and absolute liability, ihere being no subsisting principal liability to which it can be wllatera!).** *' Gibbs fs. Blanchard, 15 Mich. <92, Christ iancy, J.: "The statute only applies to such promises made in behalf, ov for the benefit of an- other, as woflld, if valid, create a distinct and several liability of the party thus promising, and not a joint liability with the party in whose behalf it is made .... If the promise or the obligation of the two be joint, as between them, on the one side and the promisee on tne other, then neither is collateral to the other, and such joint promise is original as to both." Ex Parte Lane, 1 De Gex 300 W'ainwright vs. Straw, 15 Vt. 215 Eddy vs. Davidson, 42 Vt. 56 Stone vs. Walker, 13 Gray 613 Hetfield vs. Dow, 27 N. J. L. 440 Rottman vs. Fix, 25 Mo. App. 571 Boyce vs. Murphy, 91 Ind. 1. 48Lakeman vs. Mountstephen, 7 Eng. Ir. App. 17, Seliourne, J.: " There can be no suretyship unless there be a principal debtor, who of course may be constituted in the course of the transaction by mat- ters E(e Post Facto, and need not be so at the time, but until there is a principal debtor there can be no suretyship. Nor can a man guarantee anybody else's debt un- less tnere is a debt of some other person to be guaranteed." In this case a contractor was asked to per- form work for a public board. Pay- ment for this work could be made by public taxation if the board, by resolution, should authorize the work. No such resolution was passed, but the promisor, anticipat- ing such action, verbally agreed to become responsible for the work. The service being performed, the board declined to pay for it or to pass the necessary resolution pro- viding for payment. The case rests upon the point that there never was any principal liability to which the promise was collateral. Goodman vs. Chase, 1 Barn. & THE STATUTE OF FRAUDS. 45 This rule will not be applied unless there is an absolute dis- charge of the original debtor. Where one promises to pay if the creditor will allow the principal debtor to remove his property from the state, while tlie effect of this may be to deprive the creditor of all means of collecting from the debtor, yet the lia- bility still subsists and the promise is within the statute. *° So a promise to pay in consideration of a forbearance to sue the debtor, or a dismissal of a pending suit, excludes a novation since the debtor remains liable.^" §39. Consideration beneficial to promisor. Co-existing liability of another is not always a test of suretyship. While every contract of suretyship within the statute requires a co-existing liability of another to which the promisor's liabil- ity is collateral, if the object of the promisor's contract is to subserve some pecuniary purpose of his own, even though the obligation of another still subsists, and the performance of the promisor's engagement will finally extinguish the debt of the other, this is not a suretyship contract within the mean- ing of the statute and need not be in writing.^^ To hold other- wise, would be to interpret the statute as a shield and cover for fraud, and to effectuate rather than to prevent a wrong. Aid. 297; Butcher vs. Stuart, U M. 1886; Mallory vs. Gillett, 21 N. Y. & W. 857; Langdon vs. Hughes, 107 412; Ames vs. Foster, 106 Mass. Mass. 272 ; Harris vs. Young, 40 Ga. 400 ; Prime vs. Koehler, 77 N. Y. 65; Meriden Britannia Co. vs.'^Ol; Davis vs. Patrick, 141 U. S. Zingsen, 48 N. Y. 247; Mulcrone vs. 479; 12 S. Ct. 58; Eaabe vs. Sauier. Amel-ican Lumber Co., 55 Mich. 622; 148 N. Y. 81; 42 W. iJJ. 516; Kmer- 22 N. W. 67; Day vs. Cloe, 67 Ky. son vs. Slater, 22 How. (U, S.) 28 (4 Bush) 563; Green vs. Solomon, Rhodes vs. Matthews, 67 Ind. 131 80 Mich. 234; 45 N. W. 87; Whitte-' McCreary vs. Van' Hook, 35 Tex. more vs. Wentworth, 76 Me. 20; 631; Greene vs.' Burton, 59 Vt. 423 Watson vs. Jacobs, 29 Vt. 169; 10 Atl. 675; Muller vs. Riviere, 50 Packer vs. Benton, 35 Conn. 343; Tex. 640; Patton vs. Mills, 21 Kas Smith Bros. vs. Miller, 152 Ala. 485; 163; Wills vs. Cutler, 61 N. H. 405 44 S. 399; Daniel Co. vs. Dickey, Walnut Co. vs. Courtney, 96 Ark, 6 So. App. 548; 65 S. E. 301; Ellis 46; 130 S. W. 566; Johnson vs, vs. Felt, 206 Mass. 472; 92 N. E. Stapleton Co., 132 Ga. 164; 63 S, 702; Sheppard vs. Newton, 139 N. E. 827; Blakeney vs. Nalle & Co., C. 533; 52 S. E. 143; Palmetto 45 Tex. Civ. App. 635; 101 S. W Mfg. Co. vs. Parker & Anderson, 123 875; Howell vs. Harvey, 65 W. Va Ga. 798; 51 S. E. 714. 310; 64 S. E. 249; Mankin vs, 49Murto vs. McKnight, 28 111. Jones, 68 W. Va. 422; 69 S. E. 981 App. 238. Rice vs. Hardwick, 124 Pac. 800 50 Ellison vs. Wisehart, 29 Ind. Munroe vs. Mundy & Scott, 146 N 32; Duffy vs. Wunsch. 42 N. Y. W. 819; Goodling vs. Simon, 54 Pa, 243. Sup. Ct. 125; Davies vs. Carey, 72 51 Harrison vs. Sawtel, 10 Johns. Wash. 537; Frohardt Bros. vs. I>uff, 242; Garner vs. Hudgins, 46 Mo. 135 N. W. 609; 156 la. 144. 4G THE LAW OF SUEBTYSHIP. The statute only applies where the debt of one party is sought to be charged upon another, and it is obvious that a verbal promise to pay for some benefit accruing to the promisor, is none ike less lawful because of some incidental benefit to an- other. A distinction must be made, however, between a beneficial consideration, which is a mere inducement to enter into the suretyship contract^ and a beneficial participation in the main contract It is the latter only which takes' the case out of the statute. The promisor may receive a money consideration for his promise, or may be induced to make the contract for other valuable considerations beneficial to him, yet it will be void if not in writing, but if the performance of the main contract, to which his suretyship is collateral is a benefit to him, a verbal promise in guaranty is sufficient. The same difference exists in principle between these two phases of guaranty as that which constitutes the difference be- tween the ordinary contract of one to pay his own debt &.nd. the collateral contract of suretyship. The contract of one to pay his own debt for goods purchased by himself does not re quire a written memorandum to prevent, fraud. Sufficient pre tection against perjury is afforded by the fact that the com- mon law requires proof of the consideration to establish the contract, and the consideration being shown the liability will be implied, and this applies with equal force where one is a beneficiary of the main contract, although incidentally in the situation of a promisor in suretyship. But there is an unguarded opening for fraud where the consideration moving from the creditor does not extend to the promisor. ~No liability follows against the promisor in such a case by the mere proof of the consideration, but it rests upon proof of the promise itself, and the Statute of Frauds was intended to safeguard this promise from uncertainty. §40. Promise to pay debt of another out of property of debtor in promisor's hands. If a debtor has placed property of his own in the possession of the promisor for the express purpose of having it applied to THE STATUTE OF FKAUDS. 47 his debt, a promise by the bailee to so apply it is merely in fur- therance of his trust and the Statute of Frauds has no applica- tion. The Statute can not be pleaded to justify a breach of trust. ''^ Other situations will, however, frequently arise which can not be disposed of on the basis of the administration of a trust. (1) Where property has been transferred absolutely to the promisor and in consideration of which he agrees with the debtor to pay his debts and thereafter verbally agrees with the creditor to pay. (2) Where the promisor has possession of property of the debtor but without any contract in reference to its application, thereafter verbally agrees with the creditor to pay the debt out of this property. The first undertaking being an absolute obligation to the debtor to pay in consideration of the transfer, the promise to the creditor will be binding though verbal.^^ The statute cannot be pleaded to prevent the discharge of the debt by the one who in good conscience ought to pay, and who in the end must pay even if the statute were interposed, for if the promisor can de- fend against the creditor the latter could pursue his remedies against the principal, and he in turn enforce his contract with the promisor. In the second case of mere possession of the property of the principal by the promisor, it is generally conceded that the promisor may bind himself verbally to pay the debt of the prin- cipal, at least to the extent of the value of the property held by him. This may be said to rest upon the groimd that it is merely a promise to pay the creditor what he otherwise would have to 52 Andrews vs. Smith, 2 C. M. & 391; McKenzie vs. Jackson, 4 Ala. R. 627; Hughes vs. Lawson, 31 Ark. 230; Power vs. Rankin, 114 111. 52; 613; Ledbetter vs. McGhees, 84 Ga. 29 N. E. 185; Plott vs. Foster, 7 227; 10 S. E. 727; Bott vs. Barr, Ala. App. 403; 62 So. 299; Stein 95 Ind. 243; Mitts vs. McMorran, vs. Deutseh, 178 111. App. 615. 64 Mich. 664; 31 N. W. 521; Smith 53 Hindman vs. Langford, 3 Strob. vs. Exchange Bank, 110 Pa. 508; 1 207 Atl. 760; Fehlinger vs. Wood, 134 442 Pa. 517; Hilton vs. Dinsmore, 21 436 Me. 410; Fullam vs. Adams, 37 Vt. 147. Meyer vs. Hartman, 72 111. Carter vs. Zenblin, 68 Ind. Justice vs. Tallman, 86 Pa. 4:8 THE LAW OF SUEETYSHIP. pay the debtor, and having the means to satisfy the promise in his own possession, he cannot be injured by any fraud or per- jury in establishing such promise^ and so the promise is not within the purpose of the statute. Such an arrangement is not merely a promise to pay the debt of another but to pay his own debt in a particular way.°* §41. Release of liens and securities by creditor as basis of orig- inal promise. A release to the debtor of liens or securities held by the cred- itor, while furnishing an adequate consideration for a collateral promise of Guaranty or Surety, does not create an original un- dertaking on the part of the promisor and such promise must be in writing.^^ If, however, the release of the liens or securities results in some benefit to the promisor, it is not within the Statute, and he may be held upon his verbal engagement even though the pnn- cipal debtor also remains liable. Thus, where a merchant proni- BiDock vs. Boyd, 93 Pa. 92; Mc- Kenzie vs. Jackson, 4 Ala. 230; Wright vs. The State, 79 Ala. 262 ; Woodruff vs. Scaife, 83 Ala. 152; 3 South. 311; Hammil vs. Hull, 4 Colo. App. 290; 35 Pac. 927; Bald- win Coal Co. vs. Davis, 62 Pae. Rep. (Col.) 1041; Davis vs. Banks, 45 Ga/l38; C. & W. Coal Co. vs. Liddell,' 69 111. 689; Putney vs. Farnham, 27 Wis. 187; Calkins vs. Chandler, 36 Mich. 320. See Richardson vs. Williams, 49 Me. 558, where it is held that the express assent of the principal must be shown in order to hold the prom- isor upon his verbal agreement to pay the debt out of a fund in his bands belonging to the principal. See also Murphy vs. Renkert, 59 Tenn. 397; Birchell vs. Neaster, 36 0. S. 337 65 Nelson vs. Boynton, 3 Met. 396; Richardson vs. Robbins, 124 Mass. 105; Corkins vs. Collins, 16 Mich. 478; Cowenhoven vs. Howell, 36 N. J. L. 323; Mallory vs. Gillett, 21 N. Y. 412; Bunneman vs. Wag- ner, 16 Ore. 433; 18 Pac. 841; Gray vs. Herman, 75 Wis. 453; 44 N. W. 248; Bray vs. Parcher, 80 Wis. 16; 49 N. W. 111. In Clark vs. Jones, 85 Ala. 127; 4 South. 771, an owner of a build- ing upon which a sub-contractor was about to place a lien verbally promised the sub-contractor to pay the amount due him from the prin- cipal contractor if he would not file his lien. Held that such promise was voidable under the statute. To the same effect see Warner vs. Wil- loughby, 60 Conn. 468; 22 Atl. 1014; Hahn vs. Maxwell, 33 ill. App. 261; Vaughn vs. Smith, 65 Iowa 579 ; 22 N. W. 684. Ti-IE STATUTE OF FEAtTDS. 49 ises a "warehouseman to pay storage charges upon merchandise ■which he is about to buy for immediate shipment, providing the warehouseman waives his lien for the charges and permits the shipment to go forward at once, the promise need not be in writ- ing ;°* or where an execution is placed upon property, a verbal promise made to the creditor, by one who claims to own the property by purchase from the execution debtor, that he will pay the debt if the execution is released, will be binding/" The same result, though based upon a different reason per- haps, is reached where the consideration for the promise is the transfer to the promisor of liens or securities held by the cred- itor upon the property of the debtor. This amounts to a pur- chase of the securities and the transaction is none the less bind- ing because the price paid is the assumption of the debt of another/* §42. Promise to pay pre-existing liability of promisor not VTitMn the statute. If the ultimate purpose of the promise is to discharge the ob- ligation for which the promisor is already bound it is not within the statute, even though the concurrent obligation of another for the same debt is thereby extinguished.^^" The substance of the transaction will prevail against the form, and although the promise is to pay if the other does not, it falls outside the statute in case the debt is in fact the debt of the promisor. This rule is illustrated by the common case of sales in which the vendee gives the note of a third party in payment and ver- bally guarantees the maker. ISTo good reason can be urged why the debtor should escape his liability merely because his promise BeProut vs. Webb, 87 Ala. 593; White, 71 111. 287; Hodgins vs. 6 South. 190. Heaney, 15 Minn. 185; Wills vs. o' Williamson vs. Rexroat, 55 111. Brown, 118 Mass. 137. App. 116. 58 Castling vs. Aubert, 2 East See also Luark vs. Malone, 34 325; Allen vs. Thompson, 10 N. H. Ind. 444; Weisel vs. Spence, 59 32; Humphreys vs. St. Louis, I. M. Wis. 301; 18 N. W. 165; Blount & S. Ry. Co., 37 Fed. Rep. 307. VB. Hawkins, 19 Ala. 100; Scott vs. ssa clay Lumber Co. vs. Hart's Branch Coal Co., 140 N. W. 912; 174 Mich. 613. 60 THE LAW OF SURETYSHIP. was made in such form that when carried out it extinguishes the debt of another." For the same reason a verbal acceptance is not within the Statute, where the acceptor holds funds of the drawer to meet the bill ; for it is merely a promise by the acceptor to discharge his obligation to the drawer by paying his creditor. °" An owner of land upon which there are two mortgages exe- cuted by some prior owner, verbally promises the second mort- gagee to pay off the first mortgage in consideration of the second mortgagee releasing him from personal liability on his debt. The second mortgagee if this arrangement were carried out being advanced to a first lien holder on the land. Such a promise, though to pay and extinguish a debt created by another, is not within the Statute, since the promisor has al- ready become liable for the first mortgage by reason of his own- ership of the land."^ 69 Brown vs. Curtiss, 2 ]S. Y. 225 Garden vs. McNiel, 21 N. Y. 336 Malone vs. Keener, 44 Pa. 107 Barker vs. Seudder, 56 Mo. 272 Dyer vs. Gibson, 16 Wis. 580; Wy- man vs. Goodrich, 26 Wis. 21; Mo- bile &. Girard R. R. Co. vs. Jones, 57 Ga. 198 ; Bryant vs. Rich, 104 Mich. 124; 62 N. W. 146. In Dows vs. Swett, 120 Mass. 322, the promise was to guarantee a note which a third party execut- ed direct to the creditor in settle- ment of the promisor's debt. Such a case seems to involve all the prin- ciples upon which the cases rest in which the promisor is the owner of the note and transfers it to the cred- itor for his own debt with a verbal guarantee. In both cases, the sub- stance of the transaction is to pro- vide for the payment of his own debt. The Court, however, held this promise to be collateral and within the Statute of Frauds. 60 Grant vs. Shaw, 16 Mass. 341; Spaulding vs. Andrews, 48 Pa. 411; Nelson vs. First Nat. Bank of Chi- cago, 48 111. 36; OlConnell vs. Mt. Holyoke College, 174 Mass. 511; 55 N. E. 460. «i Teeters vs. Lamborn, 43 0. S. 144; 1 N. E. 513. See also Darst vs. Bates, 95 111. 493; Besshears vs. Rowe, 46 Mo. 501 ; Bateman vs. Butler, 124 Ind. 223; 24 N. E. 989; Fain vs. Turner, 96 Ky. 634; 29 S. W. '628; Comstock vs. Xorton, S@ Mich. 277; Dodge vs. Zimmer, 110 N. Y. 43; 17 N. E. 399; Malone vs. Keener, 44 Pa. 107; Landis vs. Royer, 59 Pa. 95; Dorwin vs. Smith, 35 Vt. 69; Murphey vs. Gates, 81 Wis. 370; 51 N. W. 573. THE STATUTE OF FRAUDS. 51 §43, Assuriiption of vendor's debt as part of purchase price not within the statute. The rule that a debtor may not invoke the Statute of Frauds as a protection against his own debts is further illustrated in those transactions in which a purchaser of property agrees with the vendor to assume and pay certain debts of the vendor as a part of the purchase price. This rests not only upon the prop- osition already considered, that a promise to a debtor to pay his debt is not within the statute,"^ but also upon the further fact that it is the promisor's own debt which he agrees to pay by ex- tinguishing the debt of another.®^ Such verbal promise made to the creditor is valid for the same reason,®* and such promise if made only to the debtor is enforceable by the creditor for whose benefit it is made.°° §44. Contract of del credere agent not within the statute. An agent or factor selling goods of his principal on a del credere commission, who undertakes to guarantee that the per- sons to whom he sells will perform their contract^ occupies a po- sition analogous to one who buys goods and offers the note of a third party in payment guaranteeing the maker. In the latter case, the promisor guarantees that the thing which he offers in exchange for his obligation shall be equal in value to what it purports to be. In the del credere contract he guarantees, in consideration of his employment and extra eommissionsi, that 62 Ante Sec. 31. Becker vs. 64 Todd vs. Tobey, 29 Me. 219; Krank, 77 N. Y. S. 665; 75 App. Robbins vs. Ayres, 10 Mo. 538; Div. 191; affirmed, 176 X. Y. 645; First Nat. Bank vs. Chalmers, 144 68 N. E. 1114; Sargent vs. Johns, N. Y. 432; 39 N. E. 331; Keyes vs. 206 Pa. 386; 55 Atl. 1051; Gay vs. Allen, 65 Vt. 667; 27 Atl. 319; Schaefer, 52 Wash. 269; 100 P. 334; Skinker vs. Armstrong, 86 Va. 1011; Citizens Bank vs. Douglass, 161 S. US. E. 977; Hooper vs. Hooper, 32 W. 601; Bone vs. Smith, 164 S. W. W. Va. 526; 9 S. E. 937; Green vs. 922; Bicknell vs. Henry, 69 Wash. Hadfield, 89 Wi.s. 138; 61N. W. 310. 408; 125 Pac. 156. «= Mason vs". Hall, 30 Ala. 59'9; 63 Eabbermann vs. Wiskamp, 54 Sacramento Lumber Co. vs. Wag- Ill. 179; Neagle vs. Kelly, 146 111. ner, 67 Cal. 293; 7 Pac. 705; Boals 460; 34 N. E. 947; McCasland vs. vs. Nixon, 26 111. App. 517; Carter Doorley, 47 111. App. 513; Hodg- vs. Zenblin, 68 Ind. 436; Stariha vs. kins vs. Jackson, 70 Ky. 342; Len- Greenwood, 28 Minn. 521; 11 N. W. nox vs. Erower, 160 Pa. 191; 28 76; Wynn vs. Wood, 97 Pa. 216; Atl. 839; Staves Carriage Co. vs. Putney vs. Farnham, 27 Wis. 187; ■ Jones, 123 Pae. 148; 32 Okl. 713. Green vs. Richardson, 4 Colo. 584; Sabo vs. Nimett, 178 111. App. 459'. 52 THE LAW OF STJBETTSIIIP. the result of his sale shall be of a certain value to his principal. In both cases the consideration moves from the creditor to ^e promisor who assumes a liability in furtherance of hia own interests and the statute does not apply.°® §45. Pleading transactions within the statute — PlaintifE's al- legations. A petition or declaration, upon a contract required by the statute to be in writing, need not aver that such contract is in Writing. It is sufficient to set out that a valid agreement was made, and it will be presumed to be in lawful form until the contrary is shown. A compliance with the requirements of the statute is a matter of proof and not of pleading. The statute has not altered the rules of pleading so far as the plaintiff is con- cemed."' §46. Pleading statute as a defense. A demurrer to the plaintiff's bill or petition will not raise the question of a non-compliance with the statute except where the plaintiff affirmatively pleads facts which show a verbal con- tract"* If, however, the plaintiff's pleading shows a non-com- pliance with the statute, the defense of the statute may be in- eoBuUowa vs. Orgo, 57 N. J. Eq. Titus, '46 0. S. 541; 22 N. E. 717; 428; 41 Atl. 494; Osborne vs. Bak- Ecker vs. Bohn, 45 Md. 278; Eus- er, 34 Minn. 307; 25 N. W. 606; ley vs. Hollingsworth, 170 Ala. 396; Suman vs. Inman, 6 Mo. App. 384; 54 S. 95; Alaska Salmon Co. vs. Bradley vs. Richardson, 23 Vt, ^720 ; Standard Box Co., 158 Cal. 567; Sherwood vs. Stone, 14 N. "K 267; 112 P. 454; Dennison vs. Barney, 49 Guggenheim vs. Kosenfield, 68 Tenn. Colo. 442; 113 P. 519; Delaware 533; Sutton & Co. vs. Grey, 1 Q. B. Insurance Co. vs. Pennsylvania Fire 285 [1894]. Insurance Co., 126 Ga.'380; 55 S. u' Dexter vs. Ohlander, 89 Ala. E. 330; Hanson vs. Svaruerud, 18 262; 7 South 115; Barnard vs. X. D. 550; 120 X. W. 550; Matth- Lloyd, 85 Cal. 131; 24 Pac. 658; evvs vs. Towell (Tex. Civ. App.), Hancock vs. Council, 96 Ga. 778; 138 S. W. 169. See note. 22 S. B. 335; Porter vs. Drennan, Contra (by statute) — Langford 13 Brad. (111. App.) 362; Speyer vs. Freeman, 60 Ind. 46; Waymire vs. Deajardins, 144 111. 641; 32 N. vs. Waymire, 141 Ind. 164; 40 N. E. 283; Elliott vs. Jenness, 111 E. 523; Burden vs. Knight, 82 Iowa Mass. 2&; Mallaly vs. Holden, 123 584; 48 N. W. 985. Mass. 683; Sharkey vs. McDermott, . cs strouse vs. Elting, 110 Ala. 91 Mo. 647; 4 S. W. 107; Hinchman 132; 20 South. 123; Switzer vs. vs. Rutan, 31 N. J. L. 496; Marston Skiles, 8 111. 529; Murphv vs. Stell vs. Swett, 66 N. Y. 206; H;eading- 43 Tex. 123. " [ ton vs. Neff, 7 0. 231; Reinheimer Con-tro— Babcock vs. Meek, 45* vs. Carter, 31 0. S. 579; Shields vs. Iowa 137. THE STATUTE OF FRAUDS. 53 terposed by demurrer."*" But the Statute of Frauds will not be available as a defense unless pleaded.'" This rule will generally be applied, even in cases where the bill or petition shows affirma- tively a non-compliance with the statute. If the defendant does not demur or plead the statute he will waive the defense.'^ I A request to the court to charge is not a pleading, and the issue of the statut© cannot be put into the record in this way,'^ nor by request for special findings.'* Even though the defend- ant admits in his answer the making of the contract, he may have the protection of the statute if the defense is pleaded." 09 Randall vs. Howard, 2 Black (U. S.) 587; Boyd Tobacco Ware- house Co. vs. Terrill, 76 Ky. 463; Howard vs. Brower, 37 0. S. 402; Macey vs. Childress, 2 Tenn. Ch. 438; Ex parte Banks, 64 So. 74; 185 Ala. 275. '» Lyon vs. Crissman, 22 X. C. 268; Marston vs.. Swett, 66 X. Y. 206; Wells vs. Monihan, 129 N. Y. 161; 29 X. E. 232; Bless vs. Jen- kins, 129 Mo. 647; 31 S. W, 938; Graff vs. Foster, 67 Mo. 512; Doug- lass vs. Snow, 77 Me. 91; C. & W. Coal Co. vs. Liddell, 69 111. 639; Osborne vs. Endicott, 6 Cal. 149; Wiseman vs. Thompson, 94 Iowa 607; 63 X. W. 346; Guynn vs. Mc- Cauley, 32 Ark. 97; biit see Hocker vs. Gentry, 60 Ky. 463; Boston Duck Co. vs. Dewey, 6 Gray 446. Also Billingslea vs. Ward, 33 Md. 48, where it is held that it is not necessary for the defendant to plead the statute if the plaintiff sets up an agreement which would be void if not in writing, and that the plaintiff' must establish such con- tract by written evidence in mak- ing his prima facie ease. Under the Ohio code the issue of a non-compliance with the statute may be raised by a general denial of the petition. Birchell vs. Xeas- ter, 36 0. S. 331. See also Leesley Bros. vs. Eebori Fruit Co., 162 Mo. App. 195; 144 S. W. 138. JiBattell vs. Matot, 58 Vt. 271; 5 Atl. 479; Carpenter vs. Davis, 72 111. 14. '-Warren vs. Dickson, 27 111. 115; Brigham vs. Carlisle, 78 Ala. 243; Cosand vs. Bunker, 2 S. D. 294; 50 X. W. 84. '3 Porter vs. Wormser, 94 X. Y. 431. (J'Burt vs. Wilson, 28 Cal. 632; IloUingshead vs. McKenzie, 8 Ga. 457; Taylor vs. Allen, 40 Minn. 433; 42 X. W. 292; Thomas vs. Churchill, 48 Xeb. 266; 67 X. W. 182; Ashmore vs. Evans, 11 X. J. Eq. 151; Holler vs. Richards, 102 X. C. 545; 9 S. E. 460. It has been urged that the de- fendant's admission of the contract removes all danger of fraud and per- jury, and the purpose and intent of the statute being thus fully com- plied with, the pleading of the stat- ute is wholly technical and should not prevail. Judge Story suggests further that the answer of the de- fendant being a writing signed by him is a complete compliance v.ith the statute. (Story on Eq. Jur. Sec. 755.) This view was, how- ever, strongly dissented from in ^Vinn vs. Albert, 2 Md. Ch. Dec. 169. 54 THE LAW OF SURETYSHIP. §47. Lex fori — The statute of frauds remedial. Wherever the language of the statute imposes a limitation merely upon the right to bring an action on verbal contracts within its provisions, the settled rule of England and the great weight of authority in this country is, that in actions on such contracts the law of the forum where the action is brought will prevail over the law of the place where the contract is made, for in such cases the Statute of Frauds raises no question of the validity of the contract but it stipulates the kind of evidence necessary to maintain an action upon it. In the leading English case of Leroux vs. Brown '"^ a verbal contract, within the Statute of Frauds, made in France, and valid by the laws of France was sued upon in England, and the decision of that case holding that the action could not be main- tained is the established rule of England.'" The English rule has been followed with approval by many American courts. ''' T5 12 C. B. 801. be proved is no part of the con- '8 Bain vs. Whitehaven, 3 H. L. tract itself, but its admission or re- Cases 1. jection becomes a part of the pro- '7 Dower vs. Chesebrough, 36 ceeding on the trial, where its com- Conn. 39; Townsend vs. Hargrave, peteney and sufficiency must be de- 118 Mass. 325; Emery vs. Burbank, termined. When the required evi- 163 Mass. 326; 39 N. E. 1026; Bird dence is lacking the courts must vs. Monroe, 66 Me. 337. refuse the enforcement of the con- Heaton vs. Eldridge & Higgins, 56 tract. And it seems clear, that O. S. 101, Williams, J.: "This such a statutory regulation prescrib- statute, in plain terms, forbids the ing tile mode or measure of proof maintenance of an action in any of necessary to maintain an action or the courts of this State, on any defense, pertains to the remedy, and agreement which, by its terms, is constitutes a part of the procedure not to be performed within a year, of the forum in administering the unless the action is supported by remedy.'' Ballantine vs. Yung the required written evidence. The Wing, 146 Fed. 621. -widence by which a contract shall But see Cochran vs. Ward, 5 Ind. App. 89; 29 N. E. 795. CHAPTER III COMMERCIAL GUARANTIES. Sec. 48. Scope of the Subject. Sec. 49. Construction of Contracts of Guaranty. Sec. 50. Construction of Equivocal or Ambiguous Words. , Sec. 51. General Guaranty. See. 52. Special Guaranty. Sec. 53. Guarantor for One Principal not Held for Joint Principals. Sec. 54. Guarantor for Joint Principals not Held for One. See. 55. Retrospective Guaranties. Sec. 56. Guaranty without Knowledge of Principal Debtor. SSc. 57. Consideration. Sec. 58. Form of Guaranty. Sec. 59. Continuing Guaranties. Sec. 60. Same Subject Continued. Sec. 61. Absolute Guaranties. Sec. 62. Guaranty of Collectibility. Sec. 63. Test of Due Diligence. Sec. 64. Notice to Guarantor of Acceptance of the Guaranty and Advance- ments Thereon. Sec. 65. Federal Court Rule as to Notice of Acceptance of Guaranty. Sec. 66. Rule of the State Courts as to Notice of Acceptance of Guaranty. Sec. 67. Notice to Guarantor of Default of Principal. Sec. 68. .Cases in Which Notice to Guarantor of Default is Necessary. Sec. 69. Joint and Several Guaranties. Sec. 70. Guaranty Covers Interest. Sec. 71. Revocation of Guaranty. §48. Scope of the subject. The term Commercial Guaranty is used here to describe those transactions wherein one person agrees with another to indem- nify him if he will give credit and faith to a third person.^ 1 There is no special significance a judicial or official bond, or a guar- in the use of the word " commer- anty against the negligence or tort cial " in this connection. The con- of the principal, tract of guaranty in a mercantile The technical contract of the or business transaction is no dif- Guarantor is, however, rarely met, ferent than a guaranty against the if at all, outside of " commercial default of the principal in any Guaranties." other relation, such as a bail bond, 55 56 THE LAW OF SUEBTYSHIP. V The special contract of the Guarantor as distinguished from the Surety and other forms of Suretyship is the subject of this chapter.^ The principal field of this branch of Suretyship is that of sales wherein letters of credit or guaranty constitute the in- ducement for the owner of merchandise to part with his posses- sion and ownership to another. It also includes transactions whereby credit is obtained for the maJjer of negotiable paper. This class of mercantile instruments are useful and important mediums of commercial intercourse and a spirit of liberality pervades the law of this subject to the end that these convenient aids of commerce may not, by reason of strict and technical con structions, become obstacles and hindrances to business transac- tions rather than a benefit.' Letters of credit are frequently executed without the aid of legal counsel, and the extent to which th© Guarantor is bound or the seller protected is many times- not easily determined from the language employed. These contracts also often lack the evidences of deliberation which characterize some other forms of Suretyship, such as bonds or covenants under seal, and are frequently interspersed with signs and trade expressions which can be interpreted only by careful attention to the circumstances under which the transaction arises. §49. Construction of contracts of guaranty. It is of the highest importance that such construction be placed upon the common and ordinary instruments of commerce as will enable them to serve the purpose for which they are put 2 Ante Sec. '6, "Surety and Guar- heimer Son & €o., 83 Va. 3&; 4 S. antor distinguished." E. 370; Fiak & €b. vs. Rlckel, 108 "A guaranty, in its enlarged Iowa 370; 79 N. W. 120. "While sense, is a promise to answer for the contract of a guarantor is not the payment of some debt, or the to be extended by implication, yet, performance of some duty, in the as these instruments are of fre- case of the failure of another person, qu«nt use in the commercial world who, in the first instance, is liable." upon the faith of which extensive 3 Kent Oom. 121 ; Dole V9. Young, credits are given and large advances 24 Pick. 252. made, care should be taken to hold See "aso Gridley vs. Capen, 72 111. the party bound to the full extent 11; Merchants Nat. Bank va. State of his engagement, as the same may Bank, 93 Iowa 650; 61 N. W. 1065. be deduced from the language of 8 Lawrence vs. McCalmont, 2 How. the contract, read in the light of 426; Rousa vs. Oreglow, 103 Iowa the surrounding circumstances." 60; 72 N. W. 489; Gurley vs. Delaware County Nat. Bank vs. Fricder, 51 N. Y. S. 3; 28 App. King. 96 N. Y. S. 9S4; Whitall- Div. 500; Davis vs. Wells Fargo Tatum Co. vs. Manix, 113 N. Y. S. Co., 104 U. S. r59r Tischler vs. Hof- i"i" COMMERCIAL GUAEANTIES. 57 in circulation. The natural and accepted meaning of words will in general be a fair basis of interpretation, yet it may happen that both the parties use the words with some special meaning, and in such a case to give the words the force Df their general sense would not express the intent of either party. It would be manifestly unfair to permit the Guarantor to defend against his liability by standing upon som'e interpreta- tion which neither party intended when the contract wlas entered into, and equally unfair to permit the creditor to impose bur- dens which were not in the contemplation of either party, al- though in each case only the usual and ordinary meaning of the words is being urged. A more rational rule is that the language employed by the parties be interpreted according to its generally accepted mean- ing, except when it is ascertained that the parties themselves intend some other meaning. This is called, a " practical con- struction " of contracts, and where the language used is unam- biguous, has sometimes been considered as an innovation upon the familiar limitations imposed on parol evidence to vary written instruments, and also where such contract ia one of guaranty it would seem to be opposed to the elemientary prin- ciple of Suretyship, which forbids the imposition of any liabil- ity by parol. But giving to a contract the same construction which the parties themselves have given it, is establishing the real contract rather than varying it by parol. Such construction by the parties themselves may be ascer- tained by their acts and conduct in the performance of the contract as well as by their declarations. The use of the declarations and conduct of the parties, not recited or referred to in the written instruiuent, as proper aids to the court in construing such instrument, is not prohib- ited either by the law of evidence or Suretyship. The law cannot reasonably impose obstacles, under the gmse of rules of evidence, to the establishing of facts about which originally there was no dispute or misunderstanding.* iThorington vs. Smith, 8 Wall. 1; Neb. 861; 86 N. W. 4»&; Finnucan Confederate Note Oase, IS' Wall. vs. Feigenspan, 81 Oonn. 378; 71 548 ; Excelsior Needle Co. vs. Smith, Atl. 497 ; Newcom.b vs. Kloeblen, 77 61 Conn. 56; 23 Atl. «93; Swisher N. J. L. 7fil; 74 Atl. 511; Booth vs. Deering, 204 111. 203, 306; 68 vs. Irving Nat. Exch. Bank, 116 N. E. 517; Rice vs. MdCague, 61 Md. 668; 82 Atl. 652; Third Nat. 58 THE LAW OF SUEETYSHIP. Where the context shows that the words are necessarily used in a special or restricted sense, tha mutual intent to so use the words will be presumed/ or parol evidence may be offered to show that the -word was intended to be modified by the usage of some particular trade or occupation.* The distinction between, the use of parol evidence to establish the meaning of words, and the use of such evidence to add new words and conditions to the contract is self evident Such con- struction by the special interpretation of the parties i.s only admissible, however, in those transactions in which the special Bank vs. Laidlaw, 86 O. S. 91; 98 N. E. lOlS; Macdonald vs. Longbot- tom, 1 El. & El. 977. "In these cases the parol testi- mony is used not only to explain the suri'ounding circumstances, but also to enable the court to look in upon the mind of the contracting parties and read the written words of their contract in the very sense in which they wrote them." In re Curtis, 64 Conn. 501; 30 Atl. 7'6S; Reissner vs. Oxley, 80 Ind. 580; Reisenleitcr vs. Lutherische Kirche, 29 Mo. App. 291; Cavazos vs. Tre- vino, 6 Wall. 773. In First Nat. Bank vs. Fiske, 133 Pa. 241 ; 19 Atl. 554, F. wrote the bank that he was expecting shipment of wool for sale on commission from R., stating, "We will honor his drafts with bill of lading attached." The bank cashed the draft and F. refused to accept same claiming that it was the understanding of the bank and himself that the draft should be for only three-fourths of the selling price, whereas the draft made was for the full amount. Held that the fact of svLch understanding might be shown. See also Lee vs. Dick, 10 Pet. 482; Mauran vs. Bulus, 16 Pet. .5128; Bell vs. Bruen, 1 How. 169; Cumberland Glass Mfg. Oo. vs. Wheaton, 208 Mass. 4135; 94 N. E. 808; Punta Gorda Bank vs. State Bank, 52 Fla. 399 ; 42 So. 846 ; Fin- nuean vs. Feigenspan, 81 Conn. 378 ; 71 Atl. 497 ; Home Savings Bank vs. Hosie, 119 Mich. 116; 77 N. W. 625; Richardson vs. County of Steuben, 226 N. Y. 13; 122 N. E. 449 ; First Nat. Bank of Van Wert vs. Houtzer, 96 0. S. 404; 117 N. E. 383. • In Merchants Nat. Bank vs. Cole, 83 O. a 50; 93 N. E. 465, it was held that "an unlimited guaranty in the absence of words showing ^that it was intended to be continu- ing is equivocal, and the surround- ing circumstances may be proven, not to contradict or vary the terms of the writing but to enable the court to put itself in the place of the parties the better to understand the terms employed in the writing and to arrive at the mutual inten- tion of the parties." Contra — Ins. Co. vs. Doll, 36 Md. 8'9; Davis vs. Shafer, 50 Fed. Rep. 764; Railroad Co. vs. Ttimble, 10 Wall. 367 ; Michael vs. St. L. M. F. Ins. Oo., 17 Mo. App. 23; 'Ohrisman vs. Hodges, 7S Mo. 413; Miller vs. Dunlap, 22 Mo. App. 97; St. Paul & Dulutlh R. 'Co. vs. Blackmar, 44 Minn. 514; 47 N. W. 172; Wads- worth vs. Smith, 43 Iowa 439. Holding that w'here the language of a written instrument is free from ambiguity a, special construction placed upon it by the party who drew it is inadmissible. 5 Taylor vs. Smith, 116 N. C. 531; 21' S. E. 202. The contract in this case was between sisters and made provision for ownership of property in the survivor if one should die without a "living heir." The con- text makes it manifest that the words "living heir" were intended to mean "living issue," as neitlhei" could die without a "living heir," as the Surviving sister would be sudh heir. See also Mills Carleton €o. vs. Huberty, 84 O. S. 81; 96 N. E. 383. BMallan vs. May, 18 M. & W. STl; Kirby vs. W. St. L. & P. Ry. lOo., 109 111. 412; Stanley vs. West- ern Ins. Co., L. R., 3 Ex. 71 ; Metro- politan ExhiMtion 'Co. vs. Ewing, 12 Fed. Rep. 198'. COMMERCIAL GUARANTIES. 59 interpretation is shown to' have been fully concurred in by both parties. A different rule applies where only one party acts upon some special interpretation and the other acts upon a different con- struction, or where the lan^age employed is ambiguous. While the great object in the construction of all contracts is to effectuate the intention of the parties, yet the intention of one party cannot be set up against the intention of the other.*" In such cases, the generally accepted meaning of the words used must prevail, even though in an extreme case such construction ' might be contrary to the intention of both , parties. .§50. Construction of equivocal or ambiguous words. If the language of the guaranty is susceptible of two mean- ings, the same rules of construction should be applied as in any other form of contract. (a) Ascertain, if possible, the sense in which the parties themselves mutually understood the words, giving effect to such ascertained meaning. (b) If a mutual understanding of the parties cannot be es- tablished by reference to the context, the deelaxations and con- duct of the parties or the surrounding circumstances, the con- struction placed upon the contract by the promisee and upon which he acted should prevail without regard to the understand- ing of the promisor, providing such construction by the promisee was reasonable.^ The very just and salutary maxim of Suretyship that the promisor is a favorite with the law has perhaps been extended in its applications beyond the demands of either equity or justice. It is highly proper that the promisor be peiinitted to stand upon the exact letter of his bond, in the sense that no conditions or obligations may be imposed by implication, and that no construction should be made which will hold him liable beyond the express terms of his engagement. To this extent he is often properly favored.''* Where the intent of the parties is clearly «" Mamerow vs. National Lead terms of his guaranty, notliing more Oc, 206 111. 626; 69 N. E. 424; is intended than that he is not to Newoomb vs. Kloelblen, 77 N. J. L. be held liable for anything that ia 79'1; 74 Atl. 511; Mudge vs. Varner, not tvithin the express terms ot tlhe J46 N. C. 147 ; 59 S. E. 540. instrument in which his guaranty is 7 Ante See. 18. contained: that his liability is not 7» London and S. F. Bank vs. Par- to be extended by implication be- rofct, 125 Oal. 472; 58 Pac. 462. yond these limits, or to other sub- "When it is said that a, guarantor I'ecta, than those expressed in the fe entitled to stand upon the strict instrument of guaranty. But for 60 THE LAW OF SURETYSHIP. expressed in the instrument, or has been fully aiscertained from the surrounding circumstaxices, the rule of strict construc- tion applies, and the Guarantor may stand upon the precise terms of his contract. In this the authorities are all agreed.' Beyond this there appears to be no equity in favoring tlie promisor in Suretyship. It may well be doubted whether a S'urety or Guarantor should be permitted to claim the protection of his so called "equity" to prevent a disclosure of the con- tract which he really intended to make, merely because the language he happened to employ was not the most appropriate to express his real intent, or whether, having used words, sus- ceptible of a double meaning he may claim the same protection against one who in good faith acted upon a construction differ- ent from the one intended by the promisor. ° the purpose of ascertaining the mean- ing of the language which he has used, and thus determining the ex- tent of his guaranty, the same rules of construction are to be applied as are applied in the construction of other written instruments. His lia- bility is not to be extended by im- plication beyond the terms of his guaranty as thus ascertained." See also Stewart vs. Knight & Jillson Co., 1&6 Ind. 498; 76 N. E. 493. 8 Miller vs. Stewart, 9 Wheat. 680; Smith vs. Montgomery, 3 Tex. im; Duatin vs. Hodgen, 47 111. 125; Markland vs. Kimmel, 87 Ind. 960; Staver vs. Locke, 22 Ore. 519; 30 Pac. 497; State vs. Medary, 17 0. 554; Kepley vs. Carter, 49 Kan. 72; 30 Pac. 182; Columibus Sewer Pipe Co. vs. Ganser, 58 Mich. 385; 25 N. W. 377; Cashing vs. Cable, 48 Minn. 3: 50 N. W. 8i91; Crane Co. vs. Specht, 39 Neb. 123; 57 N. W. 1015; Guardian Trust Go. vs. Peabody, 107 N. Y. S. 515; George D. Witt Shoe Co. vs. Peacock, 150 N. C. 545; 64 S. E. 210: Manhat- tan Kolling Mill vs. Dellon, 113 N. Y. S. 571. See also Hill Mercantile a>. vs. Rotan Grocery Co., 127 S. W. 1080: Third Nat. Bank vs. Laid- law, 8i6 0. S. 91 : »8. N. E. 1015. 9 The mischief resulting from a sustained effort to do "enuity" in accordance with fixed rules is illus- trated in Birdsall vs. Heacock 32 O. S. 177. Here the language of the guaranty was "Please send my eon the lumber he asks for and it will be all right." The son was about to engage in the lumber business and was seeking, by this arrangement between his father and the creditor, to establish a credit which would enable him to buy from time to time as his needs should require. Tlhis wag known to both creditor and Guarantor and from all the cir- cumstances was the undoubted sens» in which the words of the Guaranty are used, and for the purposes of the decision it -anpears to be con- ceded that the Guarantor if asked would admit that he intended to guarantee such purchases as his son should make from time to time in the regular course of hig business, and that the creditor acted upon such construction. The principal presented his letter and purchased a small amount of luinber and continued to purchase other and larger amounts from time to time, and the holding is that the Guarantor is liable only for the small amount the principal hap- pened to call for when he presented his letter. The conclusion of the Court is that "such an instrument should be confined to the immediate transac- tion, unless the language of the promise is sufficiently broad to show that it was meant to reach beyond the present, and render the guaran- tor answerable for future credits." Such holding is consistent' with., COMMERCIAL GUARANTIES. 61 " Theire is a sense, inidoubtedly, in which it may be said that these obligations are to be strictly construed; and it is this: That the Surety is not to be held beyond the very precise stipulations of his contract. He is not liable on an implied engagement where a party contracting for his own interests might be, and he has a right to insist upon the exact perform- ance of any condition for which he has stipulated, whether oth- ers would consider it material or not. But where the question is as to the meaning of the written language in which he has contracted, there is no difference, and there ought not to be any, between the contract of a surety and that of any other • party." " and strictly in line with the dictum of Chief Justice Marshall who held it to be the duty of the vendor not to part with his goods upon the credit of one not the vendee, with- out ascertaining the exact meaning and extent of the contract which the Guarantor makes (Russell vs. Clark, 7 Cranch 90) and this is also in line with other cases adopting the Marshall theory. Ante Sec. 18, and cases there cited. 10 Gates vs. McKee, IS X. Y. 237. The view that letters of guaranty where the language is amibiguous will be taken most strongly against the Guarantor has received a wide application both in this country and in England. Haight vs. BrooKs, 10 Ad. * Ell. 309; Mayer vs. Isaac, 6 Mees. & Wels. 605; Martin vs. Wright, 6 Ad. & Ell. N. S. 917; Bastow vs. Bennett, 3 Camp. 220; Bainbridge vs. Wade, 16 Ad. & Ell. N. S. 89; Drummond vs. Prestman, 12 Wheat. 515; Hoey vs. -Jaorman, 39 N. J. Law 523; First Nat. Bank of Van Wert vs. Houtzer, 96 0. S. 404; 117 N. E. 383. "There is no rule exclusively ap- plicable to instruments of surety- ship and requiring them to be in all oases interpreted with stringency and critical acumen in favor of the Surety ana against the creditor, and all ambiguities to be resolved to the advantage of the Promisor, and ev- ery li*bility excluded from the op- eration of the instrument that can by a restrained and refined construc- tion be deemed outside the agree- ment. In guaranties, letters of credit, and other obligations of Sureties, the terms used and the language employed are to have a reasonable interpretation, according to the intent of the parties as dis- closed by the instrument, read in the light of surrounding circum- stances and the purpose for which it was made. If the terms are am.- biguous the ambiguity may be ex- plained by reference to the cireum- itances surrounding the parties, and by such aids as are allowable in other cases; and if an ambiguity still remains, I know of no reason why the same rule which holds in regard to other instruments should not apply ; and if the Surety has left anything ambiguous in his expres- sions, the ambiguity must be taken most strongly against him. This certainly should be the rule to the extent that the creditor has in good ()2 THE LAW OF SURETYSHIP. There is> however, no apparent necessity for construing an ambigTious contract of Guaranty most strongly against the Guar- antor even in oases where the real intent of the parties has not been ascertained. To extend to the promisee the privilege of giving to the words any construction he sees fit, is no bettei equity than to eonstnie doubtful words most strongly in favor of the Guarantor. The construction, in any event, should be reasonable, and if the promisee acts upon an unreasonable and extreme interpreta- tion, the requirements of justice and eqiiity are fully satisfied by limiting his recovery to such an amount as is ascertained to be reasonable under all the circumstances. Such appears to be the result of the weight of authority." faitli acted upon and given credit to the supposed intent of the Sure- ty." Beloni vs. Freeborn, » 63 N. Y. .387, Allen, J.; Bridgep58; A. B. Small Co. vs. Claxton, 1 Ga. App. 83; 57 S. E. 977; Lamm & Go. vs. Oolcord, 22 Okl. 493; 98 P. S.i.i; Lean vs. Geagan, 12i8 Pac. 792; 20 Cal. App. 260; Bradshaw vs. Barber, 125 Minn. 479. The much quoted words of Judge Story have materially influenced the law of the su'bjeet, wherein he states: "If the language used be ambiguous and admits of t^vo fair interpretations, and the guarantee has advanced his money upon the faith of the interpretation most fa- vorable to his rights, that interpre- tation will prevail in his favor; for it does not lie in the mouth of the Guarantor to say that he may, with- out peril, scatter ambiguous words, by which the other party is misled to his injury." Lawrence vs. Mc- Calmont, 2 How. 450. In Bright vs. McKnight, 1 Sneed (Tenn.) 168, an additional reason in support of this view is urged to the effect that it is always within the power of Guarantors to limit their obligation by appropriate words requiring notice to them of each advancement, or any other con- dition they think proper for their own protection and safety. See Ante Sec. 18, and cases there cited. 11 Smith vs. Molleson, 148 X. Y. 241 ; 42 X. E. 66(9 ; Bennett vs. Dra- per, 139 N. Y. 266; 34 N. E. 791; Davis vs. Wells, 1104 U. S. 159; Wills vs. Ross, 77 Ind. 1; Hall vs. Rand, 8 Conn. 560; White vs. Reed, 15 Conn. 457 ; London Bank vs. Par- rot, 58 Pac. Rep. (Cal.) 164; Peoria Savings Co. vs. Elder, 165 111. 55; 45 X. E. 1083; Shickle Iron Co. vs. Water Works Co., 88 Iowa 396; 4fl N. W. 987; Lowe vs. Beckwith, 14 B. Mon. (Ky.) 184; Mussey vs. Rayner, 22 Pick. 228; Mathews vs. Phelps, 61 Mioh. 327; 28 N". W. 108; Shines vs. Central Savings Bank, 70 Mo. 524; Simons vs. Steel, 3'6 N. H. 73; Gardner vs. Watson' 76 Tex. 25; 13 S. W. 39; Nbves vs. Nichols, 28 Vt. 159; Moore vs'. Holt 10 Gratt. (Va.) 284; Hooper vs. Hooper, 91 Md. 155; 31 Atl. 508; London and S. F. Bank vs. Parrott, 125 Cal. 472; 58 Pac. 1'64; National Bank of Commerce vs. Gam, 23 iC. C. 447. Post Sec. 59. COMMERCIAL, GUARANTIES. 63 §51 (reneral guaranty. All instrument of guaranty addressed to all persons, or to any one "whom it may concern, may be enforced by any one to whom it is presented who acts upon it. The law creates a privity of contract between the Promisor and the one who makes advances upon the faith of such a promise. Such an instrument is by the custom of mercantile transactions drawn for the express purpose of being shown to others as an instru- ment for them to make advances upon, and after this purpose has been accomplished it would be giving legal countenance to the perpetration of a fraud to withhold a remedy against the promisor.^^ A general guaranty is assignable and may be enforced by the assignee who makes advances relying upon it or the assignee may recover on the guaranty for past advances if the cause of action on such advances be also assigned to him,^^ and in case of a general guaranty of negotiable paper a transfer of the pa- per carries with it the benefit of the guaranty without any spe- cial assignment of the guaranty.^* A guaranty of a non- negotiable instrument has been held to pass to the assignee, although the guaranty was not in terms transferred.^*" It is held, a general guaranty of negotiable paper will not, however, be equivalent to an indorsement ; while it will be avail- able in favor of any subsequent indorsee of the paper, yet the 12 Lowry vs. Adams, 22 Vt. 160; i* Commercial Bank vs. Provident Griffin vs. Rembert, 2 Rich. N. S. Inst., 99 Kan. 361; 93 Pae. 161; (S. C.) 410; Manning vs. Mills, 12 State Nat. Bank vs. Haylen, V4 Neb. Up. Can. (Q. B.) 515; Van Wart 480; 16 N. W. 764; Lenmion vs. 1-s. Carpenter, 21 Up. Can. (Q. B.) Strong, 5d Conn. 448; 22 Atl. 293; 320; Wheeler vs. Mayfleld, 31 Tex. Gould vs. Ellery, 39 Barb. 163; 395; Ix>nsdale vs. Lafayette Bajik, Stillman vs. Northup, 109 N. Y. 18 0. 126; Birckhead vs. Brown, 5 473; 17 N. E. 379; Carpenter vs. Hill (N. Y.) 635; Union Bank vs. Longan, 16 Wall. 271; Ellsworth Coster, 3 N. Y. 203; Tidioute Sav. vs. Plarmon, 101 III. 274; Tidioute Bank vs. Libbey, 101 Wis. 103; 77 Pav. Bank vs. Libbey, 101 Wis. 193; N. W. 182. 77 N. W. 182; Codman vs. Vt. & C. i3Everson vs. Gere, 122 N. Y. R. Co., 16 Blatehf. l&o; Partridge 290; 25 N. E. 492; Claflin vs. O's- vs. Davis, 20' Vt. 499; Louisville, trom, 54 N. Y. 581; Lane vs. Ihi- N. A. & C R. Co: vs. Louisville Trust chac, 73 Wis. 655; 41 N. W. 962 Stearns vs. Bates, 46 Conn. 306 Harbord vs. Cooper, 43 Minn. 466 Co., 174 U. S. S52. But see Edgerly vs. LavFson, 176 Mass. 551; 57 N. E. 1020. 45 N. W. S60; First National Bank i*a Bassett vs. Perkins, 119 N. Y. vs. Taylor, 114 Pac. 52©; 38 Utah S. 354; Rogers vs. Harvev, 1*3 Ky. 516. 88, 136 S. W. 128. 64: THE LAW OF SURETYSHIP, Guarantor as against an indorsee of the paper after maturity had the same defenses as the maker against <)riginal payee, '^° §5!!. Special guaranty. A Guaranty is special when it is addressed to a particular person,, firm or corporation, and when so addressed only the promisee named in the instrument acquires any rights under it." The very strict rules of construction of written instruments which prevent the use of parol proof to vary their recitals will not be relaxed even to correct a mistake in the name of the promisee so as to enable some other person than the one named in the instrument to maintain the action. One making advances under such special guaranty will not be permitted to show that it was intended for him though by mistake addressed to another.^' A special guaranty implies a trust and confidence in a partic- ular person and such guaranty is not assignable until a right of action has arisen thereon. The right of action upon a spe- cial guaranty when fixed may be assigned to another.^* A stranger to the contract who make® the advances cannot'by thus substituting himself for the real promisee create any legal obligation against the guarantor. There is lacking the neces- sary privity of contract to bind the promisor. It is held that a guaranty addressed to two persons cannot be acted upon by one of the two named,^^ and for the same IB Trust Co. vs. National Bank, i? Grant vs. Naylor, 4 Oaach 101 U. S. 66; Tuttle vs. Bartholo- 234; Taylor vs. MoOlung's Ex., 2 mew, 12 Met. 452; Walton vs. Mas- Hoiist. (Del.) 24. call, 13 M. & W. 452. is Eobbins vs. Bingham, 4 Johns. Contra — Nat. Ex. Bank vs. McEl- 476; Evansville Nat. Bank vs. Kauf- fresh, 37 S. E. Rep. (W. Va.) 541. mann, 93 N. Y. 273. 16 Taylor vs. Wetmore, 10 0. 491 ; But see Levy vs. Oohen, 92 N. Y. Evansville Xat. Bank vs. Kaufmann, S. 1024, where it was held that a '013 N. Y. 273; Johnson vs. Brown, contract hy M. to build a syna- 51 Ga. 498; Nat. Bank of Peoria gogue being assignable, a guaranty vs. Diefendorf, 90 111. 396 ; Mitchell to pay him for the work is a general vs. Railton, 45 Mo. App. 273; Dry and not a special guaranty, so that vs. Davy, 10 Ad. & Ell. 30; Strange M. may assign it with the contract, vs. Lee, 3 East. 484; Wrigiht vs. and the guarantors be liable to the Russell, 2 W. Bl. 934; Barnett vs. assignee. Smith, 17 111. 965; Barker vs. Park- i9 Smith vs. Montgomery, 3 Tex. er, 1 Durn. & E. 287; Lamm & Co. 199; Penoyer vs. Watson, 1:6 Johns! vs. Ooloord, 22 Okla. 49'3; 98 Pac. 100; Eriedlander vs. New York Plate 355; Black vs. Albery, 89 Ohio iSi Glass Insurance Co., 5i6 N. Y 8. 240; 106 N. E. 38. COMMEECIAL GUARANTIES. 65 reasons a guaranty addressed to one will not be held for advance- ments made by that one and another. §53. Guarantor for one principal not held for joint principals. A contract of guaranty to stand good for the default of one person cannot be enforced if the advances are made to the principal named in the instrument jointly with another. To hold the Guarantor for such substituted parties would not only involve a variance of the original contract, but the risk of the undertaking is thereby materially increased. The promisor might be willing to become responsible for the acts of one in whom he had confidence and yet not willing to assume obligations for others. The question here involved commonly arises where the principal in the letter of credit associates with himself a partner, and the creditor thereafter makes advances relying on the guaranty. The guarantor is discharged from liability for the partner- ship advances.^" §54. Guarantor for joint principals not held for one. A guarantor of a joint enterprise may stand strictly, upon his contract and will not be liable except for advancements made to the principals jointly, who are named in the instrument. A change in a partnership by the death or retirement of one ,583. Defendant guaranteed payment Contra — American Credit Indem- of bills for glass that Should bs nity Co. vs. Cassard, 83 Md. 272; bought by one E. from the part- 34 Atl. 703. nership F. & G. On dissolution of 2" Parham Sew. Macli. Co. vs. the partnership of F. &. G. the fion- Brock, 113 Mass. 194; Bell vs. Nor- traet of guaranty was assigned to wood, 7 La. 96; Conn. Mutual Life F., one of the partners. F. sold E. Ins. Oo. vs. Scott, 81 Ky. 540 ; White glass for which E. never paid. In Sew. Mach. Co. vs. Hines, 61 Mich, a suit against the defendant guar- 423; 28 X. W. 157; Montefiore vs. antor by F., it was held that dis- Lloyd, 15 J.Scott (N. S.) 203; Lon- solution of the firm discharged the don Assurance Co. vs. Bold, 6 Ad. & defendant from all further liability Ell. (X. S.) 514; Lyon vs. Plum, under the guaranty. See also Schoon- 7o N". J. L. 882; 69 Atl. 209; Coan over vs. Osborne, 108 Iowa, 453; vs. Patridge, 98 X. Y. S. 570. 79 X'. W. 263. In Walslh vs. Bailie, In Palmer vs. Bagg, 56 N. Y. 10 Johns. 180, the guaranty was 5ii3, the principal after the execu- addressed to A. who did not, how- tion of the contract of guaranty ever, make the advancements, but associated with himseH a partner directed the customer to B., himself with the knowledge of the creditor, guaranteeing payment to B. Held Advances were thereafter made to that .\. could not recover from the the principal in his individual name Guarantor. and charged to him as sole principal DO THE LAW OF SURETYSHIP. partner will discharge the guarantor of such firm from all fur- ther liability." The Guarantor will be discharged even though the creditor made the advances without knowledge of the change in the firm/^ The result as to the Guarantor is not affected by the fact that the members of the firm axe estopped as to the creditor from claiming a dissolution by reason of their failure to give notice. Such estoppel will not apply as against the Guarantor who can only be held to the strict letter of his contract and as to him the firm is dissolved. §55. Retrospective guaranties. Whether or not a guaranty is retrospective or is merely pros- pective depends entirely upon the form of the contract. It is easily possible to make such contract one or tie other or both, but an undertaking of guaranty will not be construed to have a retroactive effect unless it appears by express words or by nec- essary implication to have clearly been the intention of the parties to embrace past transactions. It is no defense to a Guarantor whose contract includes past transactions that he had no knowledge of the existence of any past indebtedness or that he had been misled by the representa- tions of the principal as to such past indebtedness. If his eon- tract fairly imports .a guaranty of past as well as future ad- vances he will be liable ^^ Words of general import will not be construed as retrospec- tive although susceptible of such meaning. If indefinite expres- sions are used they will be presumed to refer only to future transactions.^* on the books of the creditor. Al- 23 People vs. Lee, 104 N. Y. 44r2- though delivered at the place of bus- 10 N. E. 84; Harwood vs. Kiersted' iness of the firm they were not so 20 III. 367. See also Barnes vs! delivered on the credit of the firm. OuShing, i&8 N. Y. 542. Held that the Guarantor was liable. 24 Morrel vs. CWan, L. R 7 Ch 2iCremer vs. Higginson, 1 Mason Div. 151; Weed et al. vs. Chambers 323; Holland vs. Teed, 7 Hare 50; 40 Up. Can. (Q. B.) 1; Weir Plow Cosgrove Brewing & Malting 'Co. vs. Co. vs. Walmsley, 110 Ind. 242- 11 Starrs, 5 Ont. 189; Simson vs. N. E. 232; Manhattan Rolling Mill Oooke, 8 Moore 988; Hawkins vs. vs. Delon, 113 N. Y. S. 571; Na- New Orleans Print. & Pub. Co., 29 tional Bank of Commerce vs Rocke- Iia. An. 134. feller, 174 F. 22; 98 C. C. A. 8 22 Byers vs. Hickman Grain Co., In Brooks vs. Baker 9 Dalv (N" 84 N. W. Rep. (Iowa) 500. Y. C. P.) Sm, the guaranty was The same principle is involved in upon a lease and the language em- Manhattan Gas Light Co. vb. Ely, ployed was "should any default be 39 Barb. 174. Tmndo in tho riQ^rynonf nt c^i^ „„«i" COMMERCIAL GUAEANTIES. 67 §56. Guaranty without knowledge of principal debtor. No privity of contract is necessary between the principal and the guarantor. A contract of guaranty made with the creditor without the knowledge of the principal will bind the guarantor.^^ General contracts of indemnity to nierchants against loss from the insolvency of customers, called Guaranty Insurance, are usually without the knowledge of the customer, but if based upon a consideration are valid obligations in Suretyship. Such a relation involves all the equities and conditions of a Surety- ship procured by the principal for his ovm accommodation, and the guarantor may have the same benefit from these equities in the matter of his defense.^^- §57. Consideration. The contract of guaranty will not be binding without a con- sideration.^^ But the consideration may arise from several sources. The principal or the creditor may pay the guarantor a money consideration for his risk. If the Suretyship is concurrent with the principal contract the same consideration which supports the principal contract will support the Suretyship.^* A past transaction or executed consideration will not support a contract of guaranty.^'" then the obligation is "To pay any 549 ; Kennedy, etc., Co. vs. S. S. deficiency which may be due." At Const. Co., 123 Cal. 584; 56 Pac. the time of the execution of the 457 ; Heyman vs. Dooley, 77 Md. guaranty, the lessee had already en- 16'2; 2'6 Atl. Ili7; Oahill Iron Works tered upon his term and vpas at that vs. Pemberton, 62 N. Y. S. 944 ; time in arrears for rent. Held that Klosterman vs. United Electric Co., the past due rent was not covered 101 Md. 29, 60 Atl. 251; Lomax tb. by the guaranty. Witkowsky, 124 111. App. 261; lom- 25 Solary vs. Stultz, 22 Fla. 26'3 ; poc Valley Bank vs. Stephenson, 104 Hughes vs. Littlefield, 18 Me. 400. P. 449; International Harvester Co. 2iiPeake vs. Dorwin Est., 25 Vt. vs. Fleming, 8i2 A. 843; 109 Atl. 104. 28. -"" Lagomarsino vs. Gianini, 80 27 Ante Sec. 16. Pac. 698; 146 Cal. 645; Hedden vs. 28 Erie Co. Savings Bank vs. Coit, Schneblin, 104 S. W. 887 (Mo.); 104 N. y. 532; 11 N. E. 54; Paul vs. 1'26 Mo. App. 428; Standard Sup- Staokhoiise, 38 Pa. 302; Hippach vs. ply Co. vs. Finch & Person, 60 S. Makeever, 166 111. 136; 46 N. E. E. 904; 147 N. C. 106. 790; Hirsch vs. Chicago Carpet Co., Contra — ^Where the thing was done 82 111. App. 234; Lennox vs. Mur- at the request of the guarantor, phy, 171 Mass. 370; 50 N. E. 644; Laingor vs. Lowenthal, 151 111. App. Osborne vs. Lawson, 26 Mo. App. 599. 68 THE LAW OP SURETYSHIP, It is not necessary that the guarantor should derive any ben- efit from either the principal contract or the guaranty. A ben- efit to the principal debtor is a suiEeient consideration.^* Such a eonaideration is found in an agreement for extension of -time of payment or a forbearance to sue.'" Such agreements to forbear must, however, be carried out, otherwise the benefit contra,cted for fails and the consideration fails." In England the rule appears to be that an actual forbearance lo sue in pursuance of a request from the principal will be suffi- cient consideration to support the guaranty, although the creditor makes no binding agreement to that effect.'^ Sudi a rule may be supported perhaps upon the ground of estoppel^ since the party has had all the benefits of his proposal he should not escape its burdens. The American courts have not, however, conceded this doctrine and have generally held otherwise.^^ So again an agreement to withdraw a suit will 29 Brokaw vs. Kelsey, 20 111. 304 ; McDougald vs. Argonaut Land, etc., Co., 117 Cal. 87; 48 Pac. 1021; Rob- ertson vs. Findley, 31 Mo. 384; Sav- age vs. Fox, 60 N. H. 17; Garland vs. Gaines, 73 Conn. 662, 49 Atl. 19. 3" Coffin vs. Trustees, 92 Ind. 337 ; Dahlman vs. Bammel, 45' Wis. 466 ; Lininger vs. Wheat, 49' Neb. S67 ; 68 N. W. 941 ; Peterson vs. Russell, 62 Minn. 2B0 ; 64 N. W. 955 ; Feath- erstone vs. Hendriek, 59' 111. App. 497 ; Martin vs. Black, 20 Ala. 309 ; Davies vs. Funston, 45 Up. Can. (Q. B.) 360- Lee vs. Wisner, 38 Micb. 82; Mudge vs. Varner, 1*6 N. C. 147; 59 S. E. 540; J. H. Queal & Co. vs. Peterson, 116 N. W. 503; 138 la. 514; Jones vs. Britt, 168 F. 852; 94 C. C. A. 264. Tbe agreement to extend the time or the forbearance to sue must be for a definite time, otherwise nO' spe- cial benefit results to the debtor, since the creditor may sue at any time and hence no consideration for the guaranty. It has been held, however, that an extension for a "convenient time" is a sufficient benefit to the debtor to amount to a consideration. Sadler vs. Hawkes, 1 Rolle. Abr. 27, pi. 49. See alsO' Steadman vs. Guthrie, 4 Met. (Ky.) 155. In Traders' National Bank vs. Parker, 130 N. Y. 415, the extension was for such time as would be neces- sary to enable the parties to the agreement to travel to another state and make an investigation into the affairs of the debtor. No definite time was fixed, but the agreement bound the creditor to forbear a rea- sonable length of time to enable the parties to perform the acts atipu- lated, and such extension being in fact carried out, the consideration was held good. See also Moore vs. MoKennej', 83 Me. 80; 2,1 Atl. 749'; McMicken vs. Safford, 19i7 111. 540; 64 N. E. 540. A guaranty of a note in con- sideration of an extension of time of payment is not invalid because there is no definite time fixed for such extension, viftere there is an actual forbearance for a reasonable time. See also Lefkovits vs. Fii-st Kat. Bank, 152 Ala. 521; 44 So. 613 .(Ala.) ; Standard Supply Oo. vs. Finch, 70 S. E. 745; 154 N. C. 4.5i6'; Atlas Shoe Oo. vs. Bloom, 209 Mass. 5©3; 95 N. E. 952-. 31 Cobb vs. Page, 17 Pa. 469. 82 Crears vs. Hunter, 19 Q. B. Div. 341. 33 Webbe vs. Romona Oolitic Stone Co., 58 111. App. 226 ; Shape vs. Gal- COMMBECIAL GUAEANTIES. 69 support a guaranty,^* or a release to the principal of securities held by the creditor/'' It is not necessary that the mutual promise of the principal and creditor out of -which the consider- ation arises shall result in some benefit to the prindpaL If the creditor changes his position to his detriment it is of itself sufficient consideration to bind the guarantor. §58. Form of ^aranty. The essential requisite of a contract of guaranty is that the language must amount to a promise. Letters of recommenda- tion or introduction containing advice or opinions in reference to the financial ability or the character of another are not guar- anties, and the fact that the one to whom such letters are ad- dressed acts upon the recommendation imposes no obligation upon the writer.^^" It is not necessary to use the words "prom- ise " or " guaranty " but words must be used which clearly import a promise. A mere request to the creditor to make ad- vances to the debtor does not imply a promise to guarantee pay- ment, ^® nor an expression of an opinion that the debtor is good." If, however, the obligations of third persons are accepted in settlement of debt any expression of opinion by the one trans- ferring them upon which the creditor relies, such as the note or bill is " safe " or " good " will amount to a guaranty,^* and where one wrote to a merchant requesting him to sell goods to braith, 32 Pa. 10; College Park Elec. Goldberg, 133 Wis. 175; 113 N. W. Belt Line vs. Ids, 15 Tex. Civ. App. 3911; National Bank of Ooniinerce 273; 40 S. W. 64; Hoffman vs. May- vs. Rockefeller, 98 C. C. A. 8; 174 and, 93 Fed. 171; 35 C. C. A. 256. F. 22. But see Bi:eed vs. Hillhouse, 7 ^^ Case vs. Luse, 28 Iowa 527 ; Conn. 523, holding that actual for- Kimball vs. Roye, 9 Rich. Law (S. bearance to sue was prima facie evi- C. ) 295; Eaton vs. Mayo, 118 Mass. dence of an agreement by the cred- 141; Einstein vs. Marshall, 58 Ala. itor to forbear. 153; Baker vs. Trotter, 73 Ala. 277; 34 Worcester iSavings Bank vs. Switzer vs. Baker, 95 Cal. 539; 30 Hill, ir3 Mass. 25. Pac. 701; Hardy vs. Pool, 41 N. C. 35 Koenigaberg vs. Lennig, 161 Pa. 98; Kenneweg Co. vs. Finney, 98 171; 28 Atl. 1016; Barney vs. Md. 114; 56 Atl. 482; Hughes vs. Forbes, H18 N. Y. 580; 23 N. E. Peper Co., 139 N. C. 158; 51 S. E. 890; Killian vs. Ashley, 24 Ark. 793; Fowler National Bank vs. 511. Brown, 19 Ind. App. 433; 49 N. 350 Russell vs. Clark, 7 Cranch 69 ; E. 833. Crooks vs. Propp, 66 N. Y. S. 7'53. ss Sturges vs. Circleville Bank, 11 30 Bushnell vs. Bishop Hill Col- 0. S. 153; Union Nat. Bank vs. 1st ony, 2» 111. 204 ; Thomas vs. Wright, Nat. Bank, 45 0. S. 236 ; 13 N. E. 98 N. C 27'2; 3 S. E. 487. 884; Goldring vs. Thompson, 58 Fla. But see Miami Co. Nat. Bank vs. 248 • 51 9o. 46. 70 THE LAW OF SUEETYSHIP. another " with assurance that any contract of his will and shall be promptly paid " it was held that the parties will be presumed to have intended a guaranty.*^ §59. Continuing guaranties. All guaranties must be either temporary or continuing. If restricted by their terms to a single transaction or within a fixed limit of time they are temporary. If not so restricted they continue in force until revoked. The latter class are called continuing guaranties. The ques- tion has, however, been much mooted as to whether the absence of express limitations results in a limited or continuing guar- anty; whether a general authority, without any words of lim- itation as to time or amount, to make advances to another on the credit of the promisor, will bind the guarantor for any amount at any time until revoked, or whether he is bound mere- ly for any amount the principal asks for and receives at the time he presents his letter of credit. To restrict such obligations to a single transaction and con- strue it as a limited guaranty is to adopt the view that instru- ments of guaranty should be construed most strongly in favor of the giiarantor, and to construe the instrument as a continuing guaranty is to adopt the view of the other extreme that the con- struction should be most strongly against the guarantor*" A letter of guaranty read " If you vsdll let the bearer have what leather he wants, and charge the same to himself, I will see that you have your pay in a reasonable length of time." This was held to be a limited guaranty. The Court says: " Every person is supposed to have some regard to his own in- terest ; and it is not reasonable to presume any man of ordinary prudence would become surety for another without limitation as to time or amount, unless he has done so in expre^ terms, or by dear implication." *^ • 39 Moore vs. Holt, 10 Gratt. (Va.) See also Whitney vs. Groot, 24 284; Soovilla Manf. Co. vs. Caasidy, Wend. 82; Anderson va. Blakely, 2 275 111. 463; 114 N. E. 181. Watts & iSterg. (Penn.) 237; Baker 40 Ante Sec. 50. See also 39 L. vs. Rand, 13 Barb. (N. Y.) 152; R. A. (N.S.) 724, note, "When is Smith vs. State, 10 Wyo. 157; 67 a guaranty a continuing one." Pao. 977. ?i Gard vs. Stevens, 12 Mich. 292. In iS'chwartz vs. Hyman, 107 N. Y. 562; 14 X. E. 447, the guaranty COMMEECIAL GUARANTIES. 71 The remarks of the Court in this case would seem to apply also to the following guaranty : " Please let my daughter have what goods she wants, and I will stand good for the money to settle the bills ;" yet the Court construed this to be a continuing guaranty/" It is held, however, by the weight of authority that when the use of general words of credit creates an ambiguity or uncer- tainty, resort should be had to the surrounding circum- stances to ascertain the meaning. Thus, " I, John Meadows, will be answerable for fifty pounds sterling, that Wm. York, of Stanford, butcher, may buy of John Heffield." In reference to this the Court said : " It is obvious that we cannot decide that question upon the mere construction of the document itself, without, looking at the surrounding circumstances to see what was the subject matter which the parties had in their contem- plation when the guarantee was given. It is proper to ascertain that for the purpose of seeing what the parties were dealing about, not for the purpose of altering the terms of the guarantee by words of mouth passing at the time, but as part of the con- duct of the parties, in order to determine what was the scope and object of the intended guarantee." And the Court held it to be a continuing guaranty.*' reads: "You will be kind enough Bennett, 3 Camp. 220; Hargreave to sent Jacob Poaner a full line of vs. Smee, 6 Bing. 244; Mason vs. samples, of course suitable for Pritchard, V2 East. 287; Merle vs. spring and summer, at the lowest Wells, 2 Camp. 413; Newcomb vs. figures. And I will guarantee the Kloeblen, 77 N. J. L. 79 1 ; 74 Atl. payment of any goods you may sell 511. him." This was held to be a tem- 43 Heffield vs. Meadows, 4 C. P. porary guaranty and covered only Div. 595. one transaction. The court appears See also White's Bank vs. Mylea, to have reasoned itself to this con- 7'3' N. Y. 336. In this case the guar- cltfsion, however, from the fact that anty read: "Please discount for the letter of credit contains refer- Mr. Cummer to the extent of $4,000. enees to samiples suitable for spring He will give you customer's paper and summer, and hence not intended as collateral. You can also con- to cover the later seasons in which sider me responsible to the bank for goods were ordered, and the case the same." Held to be a continuing does not, on this account, fully sup- guaranty. port the general view stated in the Earl, J. : "It is impossible to say text. Knowlton vs. Hersey, 76 Me. with certainty whether it was in- 345; Birdsall vs. Heacock, 3'2 0. S. tended as a guaranty for a single 177 ; Morgan vs. Boyer, 39 0. S. credit to the extent of $4,000, or a8 324; Eichardson Sclw>ol Fund vs. a continuing guaranty to that ex- Dean, 130 Mass. 24e; National Bank tent. In such a case a resort may be vs. Garn, 23 0. C. C. 447. liad to the surrounding circum- 42 Wright vs. Griffith, 121 Ind. stances, the nature of the business 478; 23 X. E. 281. in which the credit was to be used. See also Young vs. Brown, 53 the situation and relation of all the Wis. 33'3 ; 10 N. W. 394 ; Bastow vs. parties and their previous dealings, 72 THE LAW OP SURETYSHIP. If a guaranty is a continuing one, unlimited as to the amount and period of time for which the guarantor will be liable, such time and amount must be reasonable under the circumstances of each particular case.*^" §60. Sajue subject continued. A continuing guaranty" which limits the amount is not ex- hausted by advancements for the stipulated amount being made and paid for by the principal. A contract to stand -good for $1,000 of credit is a guaranty for any balance within this limit, and not a guaranty limited to such time as the total advance- ments should equal $1,000, so that if advancements for $1,000 are made and settled for the guarantor will be liable for addi- tional advancement, the letter of credit not being revoked. A letter of credit was held to be continuing and to cover any balance for the amount named which read: "I will be and am responsible for any amount for which A. B. may draw on you for any sum not to exceed $1,500. ' ' ** and the negotiations which led to the giving of the letter, to enable the court to ascertain what waa meant by the letter. . . . The principle ol the admission of this class of evidence is, that the court may be placed in regard to the sur- rounding circumstances as nearly as possible in the situation of the-party whose written language is to be in- terpreted; the question being, what did the person thus circumstanced mean by the language he has em- ployed? Within this principle all prior conversation between the par- ties is npt excluded. Such conversa- tion may pertain to and explain the surrounding circumstances, may be part of some res gestae, or may point out the subject matter of the con- tract." See also Mathews vs. P'helps, 61 Mich. 327; 28 N. W. 108; Fennell vs. McGuire, 21 Up. Can. (C. P.) 134; Mussey vs. Eiayner, 22 Pick. 223 ; Wood vs. Priestner, L. R., 2 Ex. 66; Hotchkiss vs. Barnes, 34 Conn. 27 ; Boehne vs. Murphy, 46 Mo. 57 ; Whitall-Tatum Oo. vs. Manix, 113 N. Y. S. 1010 ; Merchants Nat. Bank vs. Cole, 88 0. S. 50; 93 N. E. 16'5; National' Bank vs. Thomas, 220 Pa. 3W; ©O Atl. 813. 43aMamerow vs. National I^ead ■Co., 206 111. 626; 69 N. E. 504; Le- high Ooal * Iron Oo. vs. Soallen, 61 Minn. 63; 63 N. W. 245; A. B. Small Co. vs. Claxton, 1 Ga. App. 83; 57 S. E. 977; Cambria Iron Oo. vs. Keynes et al., 56 O. S. 501; 47 N. E. 548. *i Crist vs. Burlingame, 62 Barb. (N. Y.) 3&1. See also Rindge vs. Judson, 24 N. Y. 64 ; Gates vs. McKee, 13 N. Y. 232; Douglass vs. Reynolds, 7 Pet. 113; Crittenden vs. Fiske, 46 Mioh. 70; S N. W. 714; Frost vs. Stand- ard Metal Oo., 21-5 111. 240; 74 N. E. 139; Paskuesz vs. Bodner, 75 N. J,. L. 1047; 67 Atl. 1040; Malleable Iron Range Co. vs. Pusey, 244 111. 184; 91 N. E. 51'; Hepringa vs. Ort- lepp, 167 111. App. 586; Bond' vs. John V. Farwell Co., 172 Fed. 58; 96 C. C. A. 546; Grob vs. Gross, 83 N. J. L. 430, 84 A. 1064. Contra — Boston, & Sandwich Glass Oo. vs. Moore. 119 Mass. 435; Cut- ler vs. Ballou, 136 Mass. 337; Nich- olson vs. Paget, I Cromp. & Mees 48; Kay vs. Groves, 6 Bing. 276; White vs. Reed, 1« Oonn. 4.57; Al- dricks vs. Higgins, 16 Serg & Rawie 212; Finnucan vs. Feigenspan, 81 Oonn. 37»; 71 Atl. 497- COMMEKCIAL GUARANTIES. 73 §61. Absolute gujxanties. . If the liability of the promisor is fixed by the mere default of the principal it is an absolute guaranty but if the promisor's liability depends upon any other event than the non-perform- ance of the principal it is a conditional guaranty. Contracts of guaranty endorsed upon promissory notes are the most common forms of absolute guaranty. The time and amount of payment are fixed, and the liability of the guarantor depends upon no other condition than that of non-payment by the maker. If the guaranty is absolute the holder is not re- quired to make denfand upon the maker and give notice to the guarantor of the default.*^ It is not necessary to first pursue and exhaust the principal before proceeding against the guarantor in cases where the guaranty is absolute.*" Where credit is extended for a definite amount, and for a definite time, no condition is imposed other than the default of the debtor, and the liability is absolute, whether the transaction is a sale or whether it arises in the course of the negotiation of a bill or note. A guaranty of a debt upon the consideration of an extension 4= Davis vs. Wells, Fargo & Co., 6'68; 82Atl. 652; L«fkovitz vs. First 104 U. S. 156; Brown vs. Curtiss, 2 Xat. Bank of Gadsden, 44 So. 613; N. Y. 205; Olay vs. Bdgerton, 19 0. 152 Ala. 5S1. S. 549; Donley vs. Camp, 22 Ala. 4«CoIe vs. Merchants' Bank, 60 659; Parkman vs. Brewster, 15 Gray Ind. 350; ^Voodstock Bank vs. Dow- 271 ; not know the amount or the time of tJie advancements- is sometimes construed to put him in the position of making a mere offer of guaranty, and it is said an offer to contract is not binding upon the one making the offer until accepted by the one to whom it is addressed. This, how- ever, does not of itself advance* the argument in respect to the necessity for notice, since an acceptance of an offer may either take the form of a communication to the offerer, or consist in the doing of the thing which is the subject of the proposal. The argument so often insisted upon that notice enables the guarantor to watch the debtor's affairs and so lighten his pros- pective loss is not sound in principle as it only applies in cer- tain cases. If the debtor is solvent and remains solvent or if insolvent and remains insolvent, notice of acceptance or lack of such notice does not in any way affect the guarantor. The conceded equity of suretyship that the creditor must re- frain from doing anything which will increase the burden as- sumed by the promisor, does not put upon the creditor any duty of assisting the promisor to escape a loss by means of timely notice or any other act of courtesy. Although courts of last resort have widely differed upon the question of notice of acceptance and advancements, upon prin- ciple, the conclusion seems to be : (1) The essential ingredients of a contract in suretyship 80 THE LAW OF SUEETTSHIP. are the same as a simple contract and notice of acceptance is not necessary to the inception of the contract. (2) The condition of notice of acceptance of guaranty or advancements thereon not being stipulated, such condition will not be implied from the fact that lack of notice in some cases increases the risk of the undertaking, and in this respect tlie principle is no different whether or not the amount and time of payment is fixed at the time of the guaranty. §6S. Federal court rule as to notice of acceptance of guaranty. Thei case of Russell vs. Clark ^* decided by Chief Justice Marshall in 1812 was probably the earliest case in the United States Supreme Court to^ announce any rule on the subject of notice of acceptance to the guarantor. The defendants in this case wrote two letters recommending the debtors to credit, and advancements were made relying upon the recommendations, and after default the plaintiffs sought to charge the defendants as guarantors. Mr. Justice Marshall held that the letters did not constitute a contract of guaranty to whjch decision by way of obiter dictum the eminent Chief Justice added: "Had it been such a contract, it would certainly have beem the duty of the plaintiff to have given immediate notice to^ the defendants of the extent of his engagements." In Edmonston vs. Drake,'" decided in 1831, notice of accept- ance was given to the guarantor and the Chief Justice again takes occasion to express his view on this point, although not involved in the case, and he says : " It would indeed be an ex- traordinary departure from that exactness and precision which peculiarly distinguish commercial transactions (which is an important principle in the law and usage of merchants) if a merchant should act on a letter of this character, and hold the writer responsible vsdthout giving notice to him that he had acted on it." In Douglass vs. E&ynolds (1833),°" the question was fairly presented and the rule made the subject of an authoritative 58 7 Cranch 69. eo 7 pet. 113. B95 Pet. 637. COMMEKCIAL GUAEANTIES. 81 decision for the first time wherein Mr. Justice Story says : " A party giving a letter of guaranty has a right to know whether it is accepted, and whether the person to whom it is addressed means to give credit upon the footing of it or not." In 1836. the court after citing the three cases above men- tioned, says : " We see no reason for departing from the doc- trine so long and so fully settled in this court," "^ and in this case the guaranty was of a bill of exchange for a fixed amount payable at a definite time. While much is said in' these cases about the disadvantage under which the guarantor is placed by not receiving notice of acceptance, such as not being able to exercise vigilance over the affairs of the debtor, yet the ground upon which these adjudi- cations rest is that acceptance of a guaranty is essential to the inception of the contract."^ ' The Federal Court rule, therefore, may be stated to be that notice of acceptance of the guaranty is essential to the validity of the contract. Important modifications or exceptions to the 8» Lee vs. Dick, 10 Pet. 496. o^ " He has already had notice of See also Adams vs. Jones, 12 Pet. the acceptance of the guaranty, and 207 (1838), where the mle is af- of the intention of the party to act firmed upon the authority of the under it. The rule requiring this no- four cases cited in the text. " This tice within a reasonable time after is not now an open question in this the acceptance is absolute and im- court, after the decisions which perative in this court, according to have been made in Russell vs. all the eases; it is deemed essential Clarke, Edmondson vs. Drake, to an inception of the contract." Douglas vs. Reynolds, Lee vs. Dick. Louisville Mfg. Co. vs. Welch, 10 .... It is in itself a reasonable How. 461. rule, enabling the guarantor to See also Davis vs. Wells, 104 U. S. know the nature and extent of his 1G5, Mathews, J.: " The rule in ques- liability; to exercise due vigilance tion proceeds upon the ground that in guarding himself against losses the ease in which it applies is an which might otherwise be unknown offer or a proposal on the part of the to him; and to avail himself of the guarantor, which does not become appropriate means in law and equity effective and binding as an obliga- to compel the other parties to dis- tion until accepted by the party to charge him from future responsibil- whom it is made; that until then it sly." is inchoate and incomplete and may See also Reynolds vs. Douglass, 12 t>e withdrawn by the proposer." Pet. 497; Cremer vs. Higginson, 1 Mason 323. 82 THE LAW OF STJEETYSHIP. rule have, however, somewhat reduced its application even in the Federal Court. The rule will not be applied if the failure to give notice works no hardship on the guarantor, such as where the dehtor is insolvent and remains insolvent or where he is solvent and remains solvent. Nor where the guaranty is made at the request of the cred- itor, for in such a case the proposal is said to come from the creditor, of which the guaranty is itself the acceptance, and hence the elements of mutual assent are supplied.''"' N"or where there is a valuable consideration moving from the creditor other than the expected advances, thu&, if the letter of credit states that it is in consideration of one dollar received from the creditor, although such consideration is not paid, and even though such letter is the initiatory act in the transaction, mutual assent will be necessarily implied."^ The only ease on which the Federal Court rule* now operates appears to be where no consideration from the creditor is ex- pressed, and the guarantor can show that failure to receive notioe'has operated to his detriment by reason of the changed financial condition of the debtor. The elaborate generalizations of the earlier eases have been reduced to a more practical basis by the later decisions, and the proposition that acceptance is necessary to the inception of the contract of guaranty is logically repudiated by the exception relating to the financial condition of the debtor. Formal acceptance is held, however, not to be necessary. A communication from the creditor to the guarantor advising him that he has received the letter and made the advances will satis- fy the requirements of an acceptance.** 62(1 McFarlane vs. Wadhams, 165 o* Hart vs. Minchen, 69 Fed. Rep Fed. 987. 520. 03 Davis vg. Wells, 104 U. S. 159; Notice of acceptance will also be Davis Sewing Mch. Co. vs. Kicliards, presumed from circumstances which 119 U. S. 524', 6 S. Ot. 173; Barnes show that the guarantor had actual vs. Reed, 84 Fed. Rep. 603; Butvier knowledge of the fact that the ered- vs. Baldwin, 137 Mich. 203; lOO N. itor has acted upon the guaranty. W. 46'8; Bond vs. John V. Farwell See First Nat'l Bank Dubuque vs. Oo., 172 Fed. 98; 9e C. C. A. 546; Carpenter, 41 Iowa 51-8; Adams vs. MoConnon & Co. vs. Lawsen, 135 N. Jones, 12 Pet. 207 ; Powell vs. Chi- W. 213; 22 N. D. 604. COMMEECIAL GUAEANTIES. 83 §66. Kule of the state courts as to notice of acceptance of guar- anty. A number of the States have rejected the rule in force in the Federal Court. New York and Ohio and several other States of commercial importance have asserted the doctrine that notice of acceptance of a guaranty is neither essential to the inception of the contract nor a condition of the liability of the guarantor. The fundamental basis of the rule in these States is that a suretyship contract is no different in this respect than any other contract. " By the common law no notice of acceptance of any contract was necessary to make it binding, unless it be made a condition of the contract itself, and that contracts of guaranty do not differ in that respect from other contracts." "^ The usual expression of these courts is that notice of accept- ance is not required in the case of an absolute guaranty. The term " absolute " guaranty in this connection, bowever, means merely where no condition of acceptance is stipulated, either expressly or by necessary implication. All other conditional guaranties which do not include this particular condition, such as a general guaranty of collectibility, will be considered " ab- solute " in the sens© the term is used. In one of the earlier New York cases, the letter of credit in- vited the plaintiff to sell goods to the principal with the promise to guarantee payment. The goods were so delivered but no. notice of acceptance was given the guarantor. The holding in this case is the basis of many other decisions in ISTew York and elsewhere. " If the defendant wanted notice, and did not get it from the persons wbom lie thougbt worthy of credit, it was his business to inquire and ascertain what had 'been done. There is nothing in the defendant's undertaking which looks like a condition, or even a request, tiiat the plaintiffs should give him notice if they acted upon the guaranty; and there is no cago Carpet Co., 22 111. App. 409; guarantor by the principal debtor Mitchell vs. Railton, 45 Mo. App. will be sufficient. 273; Oaks vs. Weller, 16 Vt. 63. 6= Union Bank vs. Coster, 3 N. Y. It is generally held that notice of 212. acceptance communicated to the 84 THH LAW OP SURETYSHIP. principle upon which we can hold that notice was an essential element of the contract. ' ' "'' In the States which maintain the contrary view, there is no uniformity of reasoning in support of the rule in force; the majority, perhaps, standing upon the proposition that a letter of credit relating to future advancement is a mere offer to contract in suretyship which requires inutual assent to become binding."''' 66 Smith, vs. Dann, 6 Hill, 544. See also City Nat. Bank vs. Phelps, 86 N. Y. 484. In Whitney vs. Groot, 24 Wend. 82, the letter of credit was "We consider Mr. J. V. E. good for all he may want of you, and we will indemnify the same." Tlie Court says: "The instrum.ent did not con- temiplate any notice of acceptance, or of the sales to the defendant made in pursuance of it; it was not a proposition to become surety for Van Bps, but an ajbsolute undertak- ing to pay for the goods if he did not, and obviously conteifaiplated a sale and delivery on presentation. Unless there is something in the na- ture of the contract or terms of the writing creating or implying the ne- cessity of acceptance or notice as a condition of liability, neither are deemed requisite." The following oases are in accord with the New York doctrine: Pow- ers vs. Bumcratz, 12 O. S. 273 ; Wise vs. Miller, 45,0. S. 386; M N. E. 218; Boyd vs. Snyder, 4S Md. 325; Crittenden vs^ Fiske, 46 Mich. 70; 8 N. W. 714; Platter vs. Green, 26 Kans. 252; Wilcox vs. Draper, 12 Neb. 138; ION. W. 579; Klosterman vs. Oloott, 25 Neb. 382; 41 N. W. 250; Bright vs. McKnight, 1 Sneed (Tenn.) 158; Yancey vs. Brown, 3 Sneed 89; Bank of California vs. Union Packing Co., Ill Pac. 573; 60 Wash. 496; Cowan vs. Roberts, 134 N. C. 4115; 46 S. E. 979; Wat- kins Medical Co. vs. Brand, 143 Ky. 468; 136 S. W. 867; Am. Exchange Bank vs. Seaverns, 121 111. App. 480; Pressed Eiadiator Co. vs. Hughes, 155 111. App. 80; Frost vs. Standard Metal Co., 215 111. 240; 74 N. E. 1089; Stewart vs. Sharp County Bank, 71 Ark. 585; 76 S. W. 1064; Sheffield vs. Whitfield, 6 Ga. App. 7«!2; 65 S. E. 807; Shep- pard vs. Daniel Miller Q)., 7 Ga. App. 760; 08 S. E. 451. 66a Hall's Ex'or vs. Farmers Bank of Ky., 23 Ky. Law Eep. 1450; 6S S. W. 365; Pearsell Mfg. Co. vs. Jeffreys, li8«i Mo. 386; 81 S. W. 901; Acme Mfg. Co. vs. Reed, 197 Pa. St. 359; 47 Atl. 20'5; William Deering & Co. vs. Moriell, 110 N. W. 86; 21 S. D. 159; Miami Ojunty Nat. Bank vs. Goldberg, 133 Wis. 17'5; 113 N.W. 391; King vs. Bat- terson, 13 R. I. 117; J. S. Rowell Mfg. Co. vs. Isaacs, 128 S. W. 760; 144 Mo. App. 58; J. R. Watkins Medical 'Co. vs. McCall, 133 N. W. 966; 116 Minn. 389; Lester Piano Go. vs. Romney, 126 Pac. 335 (Utah) ; Black, Starr & Frost vs. Grabow, 2 16 Mass. 516; 104 N. E. 346; Asmussen vs. Post Printing & Pub. Co., 143 P. 3&6 (Ool.). COMMEEOIALi GUARANTIES. 84a The reasoning along this line becomes rather vague where an attempt is made to combine the idea of mutual assent with that of protection to the guarajitor. Notice as an equity in favor of a guarantor to enable him to protect himself against loss need not be urged at all if mutual assent is necessary to the inception of the contract. In Massachusetts, it seems to be conceded that an acceptance is not necessary to the inception of the contract of guaranty, but that the guarantor has a right to know whether a contract has been made, that is, whether the creditor has acted on the pro- posal, and if he does not get such kuowledge, either by notice from the creditor or (semble) from some other source, he may withdraw the guaranty even though the creditor has acted upon it. Thus, it is said: "The language relied on was an offer to guarantee, which the plaintiff might or might not accept. It was an, offer to be bound in consideration of an act to be done, and in such a case the doing of the act constitutes the acceptance of the offer and furnishes the consideration. Ordiuarily there is no occasion to notify the offerer of the acceptance of such an offer, for the doing of the act is a sufficient acceptance, and the promisor knows that he is bound when he sees that action has been taken on the faith of his offer. But if the act is of such a kind that knowledge of it will not come quickly to the promisor, the promisee is bound to give him notice of his acceptanoe within a reasonable time after doing that which constitutes the acceptance. In such a case it is implied in the offer that, to complete the contract, notice shall be given with due diligence so that the promisor may know that the contract has been made. But where the promise is in consideration of an act to be done, it becomes binding upon the doing of the act so far that the promisee can not he affected hy a subsequent withdrawal of it, if within a reasonable time afterward he notifies the pronv- isor.'"^ 6' Knowlton, J., in Biatop vs. 90 N. E. 875; Cumberland Glass Eaton, 161. Mass. 499; 37 N. E. 665; Mfg. Co. vs. Wheaton, 208 Mass. Lascelles vs. Clark, 204 Mass. 362; 425; 94 N. E. 803. 84& THE LAW OF SUEETYSHIP. Where the contract cf guaranty is executed contemporaneous- ly with and as a part of the consideration for, the transaction guaranteed, notice of acceptance is not required."^" Where a guarantee is given in response to a request for it by the creditor, no notice to the guarantor that he has been accepted is necessary to bind him."^" Where the guaranty states a consideration moving directly from the guarantee to the guarantor this is sufficient to show an absolute contract of guaranty as distinguished from a mere offer of guaranty."^" The rule of a large number of jurisdictions makes lack of notice of acceptance a defense to the extent of the loss which the guarantor suffers by not receiving notice, not requiring such notice to be immediate but within a reasonable time. These cases are generally in accord with the Federal Court except as to the grounds upon which the decisions rest."* e?" Closson vs. Billman, 161 Ind. 610; 69 N. E. 449. Contra — American Agricultural Chem. Co. vs. Elsworth, 83 A. 546; 109 Me. 105. STS Nelson Mfg. Co. vs. Shreve, 94 Mo. App. 518; 6'8 S. W, 376; Stew- art vs. Sharp County Bank, 71 Ark. 585; 76 S. W. 1064; McFarlane vs. Wadhams, 165 Fed. 987; Tilt-Ken- ney Shoe C<>. vs. Haggarty, 43 Tfex. Civ. App. 33-5; 114 S. W. 3'86; Hill Mercantile Co. vs. Eotan Grocery Co., 127 S. W. 1080 (Tex.) ; J. L. Mott Iron Works vs. Clark. 6Q S. E. 227; 87 S. C. 180; Shows vs. Steiner, Logman & Frank, 57 So. 701; 175 Ala. 3'93. Contri — Acme Mfg. Oo. vs. Eeed, 197 Pa. St. 3!99; 47 Atl. 206; Ameri- can Agricultural Ohem. 'Co. vs. Ells- worth, 83 A. 5^6; 107 Me. 105. e7c Emerson Mf-j. Co. vs. Eustad, 120 N. W. 1094; 1!> N. D. 8; Buhrer vs. Baldwin, 137 MicN. 263; 100 N. W. 468; Shows vs. Steiper, Lobmau & Frank, 57 So. 701; li75 Ala. 363; McConnon.& Co. vs. Laursen, 13S N. W. 2.13; 22 N. D. 604. Contra — ^Acme Mfg. Co. vs. Eeed, 197 Pa. St. 359 ; 47 Atl. 205 ; Ameri- can Agricultural Chem. vs. Ells- worth, 83 Atl. 546; 109 Me. 195. "8 Mussey vs. Eayner, 22 Pick. 22'3; Winnebago Paper Mills vs. Travis, 56 Minn. 48-0; 58 N. W. 36; Central Savings Bank vs. Shine, 48 Mo. 456; Tolman Oo. vs. Means, 52 Mo. App. 3i8S; Walker vs. Forbes, 25 Ala. 130; Cahuzac vs. Samini, 29 Ala. 288; MdCollum vs. Cushing, 22 Ark. 540; Eapelye vs. Bailey, 3 Conn. 438; Craft vs; Isham, 1-3 Conn. 28; Buckingham vs. Murray, 7 Houst. 176; Coe vs. Buehler, 110 Pa. 366; 5 Atl. 20; Evans vs. McOor- mick, 167 Pa. 247; 31 Atl. 563; Wil- kins vs. Carter, 84 Tex. 438; 19 S. W. 997; Woodstock Bank vs. Dow- ner, 27 Vt. 539'; Xoyes vs. Nichols, 28 Vt. ISd; Ellis vs. Jones, 70 Miss. 60; 11 South. 566; Tuckerman vs. COMMEKCIAL, GUARANTIES. • 85 A stipulation that the guarantor shall receive notice of default has been held to imply a waiver of notice of accept- ance."^ The right to receive such notice is also waived by a subsequent promise to pay.^" It is not necessary that the notice of acceptance come from the creditor. Knowledge is equivalent to notice from whatever source derived and will operate as sufficient notice if acquired within a reasonable time.^"" §67. Notice to guarantor of default of principal. A guaranty of payment or performance at a definite time in- volves no duty on the part of the creditor to give notice of de- fault to the guarantor. The liability of the guarantor becomes absolute by the default unless notice is stipulated in the contract. If the guarantor is to stand merely upon the exoress terms of his contract there is no ground for demanding notice imless such condition is incorporated in his agreement. The law merchant which gives the endorser the right of notice without stipulating such condition in the contract does not apply to the guarantor. French, 7 Me. 1 16 ; Ruffner vs. Love, to require no notice of its accept- 33 111. App. 601 ; Meyer vs. Ruh- anee. Stewart vs. Kriight & Jillson stadt, m 111. App. 3i46. Co., 166 Ind. 498, 76 N. E. 743. No distinction is made in these 69 Waidsworth vs. Allen, 8 G-ratt. cases between contracts for definite 174. time and amount and contracts for Contra — ^Taylor vs. McClung, 2 future optional advances. Houst. (Del.) 24. In Indiana notice is not required '"> Gamage vs. Hutohins, 23 Me. if the guaranty is for a definite 56i5 ; Sigourney vs. Wethere^l, 6 Met. amount payable at a definite time. 553; Ashford vs. Robinson, 8 Ired. Kline vs. Raymond, 70 Ind. 271; 114. Snyder vs. dick, 112; Ind. 203; 18 "i» 'Cumberland Glass M%. Co. N. E. 581. vs. Wheaton, 208 Mass. 425; 94 N. But see Wright vs. Griffith, 121 E. 808 ; Greer Machine Oo. vs. Sears, Ind. 478; 23 N. E. 281. In this case 23 Ky. Law Rep. 2025; 66 S. W. the letter reads: "Please let my 521; Pearsell Mfg. Co. vs. Jeffreys, daughter, Mrs. H., have what goods 183 Mo. 3«6; 81 S. W. 001; Nelson she wants and I will stand good for Mfg. Co. vs. Shreve, 94 Mo. App. the money to settle the bills." Held 518; 68 S. W. 37'6. 86 • THE LAW OF SUEETTSHIP. The lack of notice puts no. burden upon the ^arantor as he knows the date of the maturity of the obligation and may, therefore, take such steps as are necessary to protect his inter- ests in case of non-performance by the principal. A guaranty upon the back of a note reading "For value, I hereby guarantee the payment of the within note" was held to import an absolute obligation to pay if the maker did not, and that no notice of default was necessary to bind the guarantor. In this case, there was a prior indorser upon whom the guar- antor might have relied if notice of default had been given such indorser, but the holder gave no such notice to either the guar- antor or the prior indorser, and the guarantor had no knowledge of the non-payment until more than a year after maturity. The maker of the note was solvent at maturity and insolvent at the time of notice to the guarantor. By this lack of timely notice the guarantor lost his recourse against both the maker and the prior indorser. But the Court says : " The nature of the obligation of the guarantor is affected by the characteir of the principal contract to which the guaranty relates. The note ex- pressed the absolute obligation of the maker to pay the sum named at the specified date of maturity or before. The guar- anty of ' the payment of the within note ' imported an under- taking, without condition, that, in the event of the note not being paid according to its terms, — that is, at maturity, — the guarantor should be responsible. " The non-payment of the note at maturity made absolute the liability of the guarantor, and an action might at once have been maihtalned against him without notice or demand. Such was the effect of the unqualified guaranty of the payment of an obligation which was in itself absolute and perfect and certain as respects the sum to be paid, and the time when payment should be madej — all of which was known ,to the guarantor, and appears upon the face of the contract. " The liability of the guarantor thus becoming absolute by the non-payment of the note, the neglect of the holder to pursue such remedies as he might have against the maker (the guar- COMMERCIAL, GUAKAJSTTIES. 87 antor not having required him to act) would not discharge the already fixed and absolute obligation of the guarantor, nor would neglect to notify the guarantor of the non-payment have such effect. ' ' "^ '1 Hungerford vs. O'Brien, 37 Minn. 306; 34 N. W. 161. See also Deck vs. Works, 57 How. Pr. 292. In Brown vs. Curtiss, 2 N. Y. 230, the Court says: "The direct engage- ment of the indorser of a negotiable note, and of the guarantor of the payment of a note, whether nego- tiable or not, is the same. Both Undertake that the maker will pay the amount when it shall become due. • If there is a failure in such payment, both contracts are broken. Ordinarily, upon the breach of a con- tract, the party boun'd for its per- formance immediately becomes liable for the consequent damages. In the case of the indorser of a negotiable promissory note, however, the liabil- ity does not become absolute, unless due notice of non-payment is given to the party whom it is intended to charge. That is not because the in- dorser has thus stipulated in terms, but it is a condition annexed by the rules of the commercial law. "In the case of a guarantor there is nothing to exempt him from the ordinary liability of parties wh6 have broken their contracts, which is direct and not conditional. No condition requiring notice of non- payment is inserted in the contract, nor is any inferred by any rule of law. The guarantor is bound to as- certain for himself whether his con- tract has been performed, and can easily obtain the requisite informa- tion from the party for whose con- duct he has assumed the responsi- bility. If he fails to do that, there is no principle which would author- ize him to inflict upon another the consequences of his own neglect." See also Reads vs. Cutts, 7 Greenl. 186; Breed vs. Hillhouse, 7 Conn. 523; Allen vs. Rightmere, 20 Johns. 365; Campbell vs. Baker, 46 Pa. 243; Roberts vs. Riddle, 79 Pa. 468; Bank vs. Sinclair, 60 N. H. 100; Dickerson vs. Derrickson, 39 111. 574; Penny vs. Crane Bros. Mfg. Co., 80 111. 244; Wright vs. Dyer, 48 Mo. 525 ; Kline vs. Raymond, 70 Ind. 271; Clay vs. Edgerton, 19 0. S. 549; Castle vs. Rickly, 44 0. S. 490; 9 N. E. 136; Walton vs. Mascall, 13 M. & W. 72 ; First Bank vs. Babcock, 94 Cal. 96; 29 Pac. 415; Hoover vs. McCormick, 84 Wis. 215; 54 N. W. 505; Wright vs. Shorter, 56 Ga. 72; Roberts vs. Hawkins, 70 Mich. 566; 38 N. W. 575; Holmes vs. Preston, 71 Miss. 541; 14 South. 455; Flen- tham vs. Steward, 45 Neb. 640; 63 X. W. 924; Heyman vs. Dooley, 77 Md. 162; 26 Atl. 117; McKee vs. Needles, 123 la. 195; 98 N. W. 618; Braddock vs. Wertheimer, 68 Ark. 423; 59 S. W. 761; Stewart vs. Sharp County Bank, 71 Ark. 585; 76 S. W. 1064; Stewart vs. Knight & Jellson Co., 16 Ind. 498; Pleas- antville Loan Society vs. Moore, 70 N. J. L. 306; 57 Atl. 1034; Pfaelzer vs. Kau, 207 111. 116; 69 N. E. 914; Miller vs. Lewiston Nat. Bank, 108 P. (Idaho) 901; People's Bank vs. Stewart, 152 Mo. App. 314; Booth vs. Irving Nat. Exch. Bank, 116 Md. 668; Providence Machine Co. vs. Browning, 68 S. C. 1; 46 S. E. 550; Tilt-Kenney Shoe Co. vs. Haggarty, 88 THE LAW OF SUEBTYSHIP. This rule will not logically admit of any modification in the cases where actual damage results to the guarantor from lack of notice, at the same time holding to the rule where no damage is sh'own. The modified rule Iield by some courts that the guaisantor of definite payment is discharged by lack of notice of default to the extent of his damage resulting from lack of notice comes to this, that if the guarantor is diligent and gives such attention to his outstanding obligations as enables him to escape additional loss without notice, then notice is not neces- sary to fix his liability. But if by lack of diligence and inattention he meets a loss which notice would have averted, then lack of notice is a de- fense/^ 43 Tex. Civ. App. 335; McConnon vs. Laursen, 135 N. W. 213; 22 N. D. 604. The great uniformity of holding on this point as well as the forcible logic of the decisions renders some- what conspicuous the few cases maintaining the opposite view. See Ringgold vs. Newkirk, 3 Ark. 96; McCollum vs. Gushing, 22 Ark. 540; Cox vs. Brown, 51 N. C. 100; Reynolds vs. Edney, 53 N. C. 406; Mayberry vs. Sainton, 2 Harr. (Del.) 24; Oxford Bank vs. Haynes, 8 Pick. 477; Brown vs. Spiegel, 156 Mich. 138; 120 N. W. 579; Andrews vs. Pope, 126 N. C. 472; 35 S. E. 817; Shores-Mueller Co. vs. Knox, 141 N. W. 948. See Lemmert vs. Guthrie Bros., 69 Neb. 499, where the court said: "The guarantor's contract is a guaranty of the mak- er's solvency, and unless there is a different intention expressed in the contract, he is entitled to rea- sonable notice of the default of the maker." 72 The modified rule that lack of notice discharges the guarantor of a definite payment or performance to the extent of the loss, appears to be in force in several States. Fuller vs. Scott, 8 Kan. 25; Withers vs. Berry, 25 Kan. 373; Lewis vs. Brewster, 2 McLean 21; Gamage vs. Hutchins, 23 Me. 565; Globe Bank vs. Small, 25 Me. 366 ; Oxford Bank vs. Haynes, 8 Pick. 423; Talbot vs. Gay, 18 Pick. 534; Whiton vs. Mears, 11 Met. 563 Farrow vs. Respess, 11 Ired. 170 Cox vs. Brown, 6 Jones (K.'C.) 100 Swisher vs. Deering, 204 111. 203 68 N. E. 517. But see Pfaelzer vs. Kau, 207 111. 116; 69 N. E. 914. In Iowa, if the guarantor is an accommodation party he cannot be held without notice of default, un- less the plaintiff alleges and proves (LS a, part of his prima facie case that the guarantor was not dam- aged by lack of notice. Sabin vs. Harris, 12 Iowa 87; Picket vs. Hawes, 14 Iowa 400. If, however, the guaranty is made by the payee, or a party in the chain of title, the guarantor must assume the burden of alleging and proving damage to himself from lack of no- tice, and may set off such damage against his liability. Peck vs. Frink, 10 Iowa 193; Martyn vs. Lama, 75 Iowa 235; 39 N. W. 285. COilMEECIAi GUARANTIES. 89 In Massachusetts, the Court has adopted the view that al- though notice of default is not a condition of the contract and the liability of the guarantor attaches immediately upon de- fault and without notice, yet the guarantor may he damaged by the negligence of the creditor in not making seasonable demand upon the guarantor, and for such damage^ he may claim set-off. " Negligence of the holder of the guaranty, in permitting the claim to slumber, when the guarantor might reasonably suppose it had been paid when due, or in the usual course of business, is the real ground on which the guarantor is exonerated. It is delay without notice, and not the bringing of a suit without notice, that is fatal to the holder of the guaranty. " This view. of the law places guaranties upon the same foot- ing with other contracts where the right of action accrues upon tlie performance or non-performance of some act by a third party." " §68. Cases in which notice to guarantor of default is necersary. (1) ^\Tiere notice is stipulated for in the contract failure to give such notice will discharge the guarantor altogether, and 73 Vinal vs. Richardson, 13 Allen duty to see that the 5 im gnaran- 532. The rule stated in the text teed is paid, and that there is no has been modified by the later Mas- duty on the creditor to give notice sachusetts decisions. Watertovpn to the guarantor of a default in pay- Ins. Co. vs. Simmons, 131 Mass. 85; ment hy the principal debtor, and and Welch vs. Walsh, 177 Mass. that if the guarantor, in violation 555; 59 N. E. 440. In the latter of his duty, has slumbered because case the guarantor of a lease was he supposed that in the absence of held not discharged from liability, a demand by the creditor the act although the lessor did not notify guaranteed had been performed by the guarantor of the default of the the principal debtor and has suf- lessee until after twenty-three fered damage from so doing, he has months had elapsed, during fifteen nothing of wl.ich he can complain of which the lessee had abundant hut his own negligence, and is liable property. The court said : "We are to pay the sum which he guaranteed of opinion that when the obligation should be p'vid." See also Cumber- of the guarantor is to pay a definite land Glass Mfg. Co. vs. Wheaton sum at a definite time, it is his et al., 208 Mass. 425; 94 N. E. 803. 90 THE LAW OF SUKETTSHIP. he may avail himself of this defense -without showing himself damaged in any amount by not receiving notice. It is like any other conditional contract, and can not be en- forced except upon performance of the condition. (2) Notice of default within a reasonable time is necessary where the facts upon which the guarantor's liability rest are not within the guarantor's knowledge or depend upon the cred- itor's option. If it is a guaranty of collectibility the non-pay- ment at maturity is not the default which fixes the liability, but it is the insolvency of the principal debtor which is the basis- of the claim against the guarantor. If it is stipulated that such insolvency shall be tested by legal process, then it is clear that the guarantor does not know and has no means of knowing whether the principal is insolvent or when the creditor will take the necessary steps to find out the debtor's condition, and tht same result follows where legal proceedings are deemed the sole test of insolvency, although not stipulated in the contract,''* and notice to the guarantor of default under these circum stances is generally held necessary and for the very satisfactory reason that the guarantor can not even by active diligence pro teet himself without notice." ''Ante Sec. 63. diflSculty, in case of the guaranty " " Demand and notice, however, of the goodness or collectibility of a are requisite to charge a guarantor, debt. The contingency upon which where the fact on which his liabil- the liability is made dependent, rests ity is made dependent rests peculiar- upon the action of the guarantee, ly loithin the knowledge of the guar- and depends on his option. The re- antee, or depends on Ms option. But suit of his efforts to enforce the lia- where the fact which determines the bility of the principal, and the pe- liability, is one which the guarantor riod of their termination are of ne- knows, or is bound to know, or cessity peculiarly within his knowl- whieh is equally within the power edge." Bashford vs. Shaw, 4 O. S. of both parties to ascertain; in 267. other words, where each party has, See also White ts. Walker, 31 111. in legal contemplation, equal means 422; Taussig vs. Eeid, 145 111. 488; of information, the guarantor must 32 N. E. 918; Farwell vs. Smith, 12 , take notice at his peril. The appli- Pick. 83 ; Sylvester vs. Downer, 18 cation of the rule requiring demand Vt. 32; Morris vs. Wadsworth, if and notice, founded on the reasons Wend. 103. above mentioned, is cleared of all COMMERCIAL GUARANTIES. 91 The same reasoBS would seem to apply where the debt is pay- able on demand/' (3) A third class of cases arises but of continuing guaran- ties of payment for future advancements under a general letter of credit. It is said that notice of default should be given the guarantor because at the time of the contract he does not know the amoimt of the future advancements, or the date of maturity, and, in this respect, the same argument prevails which is ad- vanced in connection with the question of the guarantor's right to have notice of the acceptance of his guaranty.'^ The fact of default in this class of cases is not, however, peculiarly within the knowledge of the creditor or dependent upon his option as in the case of guaranty of collectibility or debt due on demand, and the guarantor's means of information as to whether default has been committed are the' same as in the case of the guaranty of a definite amount at a definite time. In either case, he does not know of the default except by reliance upon information received after the execution of his contract, and in both cases he may get this information by inquiry of the debtor or creditor; although the reasons for requiring notice of default in these cases are not wholly satisfactory, yet a large number of decisions are to be found supporting the view that notice of default may be required in continuing guaranties of payment, where the guarantor at the time of his contract does not know the amount nor the maturity of the debt.''* In all cases where notice of default is required the failure to give such notice within a reasonable time will only discharge the guarantor to the extent of his damage in not receiving notice.^" '« Waiton vs. Mears, 11 Met. 563; for want of it, unless the notice has Nelson ts. Bostwick, 5 Hill 37; been so long delayed as to raise a Douglas vs. Eathbone, 5 Hill 143. presumption of payment or waiver, But see Foster vs. Barney, 3 Vt. or unless he can show that he has 60. lost, by the delay, opportunities for ■f' Ante Sees. 64, 65, 66. obtaining securities, which a notice, '8 Clark vs. Remmington, 11 Met. or an earlier notice, would have se- 361; MusSey, vs. Rayner, 22 Pick. cured him If the notice be 228; Gaff vs. Sims, 45 Ind. 262; delayed a very short time, but by Douglass vs. Reynolds, 7 Pet. 113; reason of the delay the guarantor Davis vs. Wells, 104 U. S. 159; Bee- loses the opportunity of obtaining be vs. Dudley, 26 N. H. 249 ; Walker indemnity, and is irreparably dam- vs. Forbes, 25 Ala. 139; Milroy vs. aged, he would be discharged from Quinn, 69 Ind. 406; Mamerow vs. his obligation. But, if the delay National Lead Co., 206 111. 626; 69 were for a long period, and it was N. E. 504. nevertheless clear that the guaran- ^9 "The guarantor is entitled to tor would have derived no benefit a notice, but cannot defend himself from an earlier notice, the delay 92 THE LAW OF SURETYSHIP A waiver of demand and notice of protest endorsed by the guarantor on the back of a promissory note has been held not to be a waiver of notice of nonpayment/"" A creditor is not required to give notice of default to a guarantor where the guarantor has notice from an indepen- dent source, or where it is his duty under the law, to take no- , tice '"" 79b §69. Joint and several guaranties. A contract of guaranty executed by two or more persons may amount to a joint obligation, or the liability may be sev- eral according as words of severalty or joint obligation are employed. The obligation will be regarded as joint, however, in all cases unless there are express words indicating a sev- eral liability. The intent of the parties in this respect may generally be determined to be joint if expressed in plural form, such as "We guarantee" or it may be made both joint and several by using the words "We or either of us guarantee," but where the form of the contract is singular, but executed by two or more persons, it expresses the intent of the obligors in the ma- jority of cases to hold such promises to be joint and several, and such is the rule.'" If the promise is merely joint a judgment against one bars an action against the other. '^ At common law, the estate of a deceased joint obligor is not liable but the survivor will be liable for the entire amount,*^ whereas if the obligation is several, or joint and several, re- course can be had against the estate of the decedent. would not impair his obligation." 80 Tond-du-Lac Harrow Co. vs. Bank vs. Gaylord, 34 Iowa 246; Haskins, 51 Wis. 135; 8 N. W. 15. Lemmert vs. Guthrie Brothers, 69' See also Delaware County Nat. Neb. 49&; 95 N. W. 1046; Swisher Bank vs. King, 95 N. Y. S. 954; East vs. Deering, 204 111. 203; 68 N. E. Bridgewater Savings Bank vs. Bates, 517; Heeringa vs. Ortlepp, 167 IlL 191 Mass. 110; 77 N. E. 711; Miller App. 586; Mamerow vs. National vs. Lewiston Nat. Bank, 108 P. 901 • Lead Co., 206 111. 626; 69 N. E. 18 Idaho 124; Wood vs. Farmer, 200 504. But see Pfaelzer vs. Kau, 207 Mass. 209; 86 N. E. 297. HI. 116; 69 N. E. 914; Davis vs. 8i Brady vs. Reynolds, 13 Cal. 32'. Wells Fargo & Co., 104 U. S. 159;. 82 Johnson vs. Harvey, 84 N. Y. Booth vs. Irving Nat. Exoh. Bank, 363. In this case it is held that the 116 Md. 668; 82 Atl. 652. discharge is as to the creditor only, 7911 Lemmert vs. Guthrie Brothers, and the equitable liability for con- 69 Neb. 499; 95. N. W. 1046. tribution between joint obligors is 7»* Mamerow vs. National Lead preserved against the estate of the Co., 206 111. 626; 69 N. E. 604; decedent. New Haven, etc., Co. vs. Graham vs. Middleby, 185i Mass. Hayden, 119 Mass. 361; Seaman vs. 34«; 70 N. E. 416. Slater, 18 Fed. Rep. 485; Hawkins COMMERCIAL GUAEANTIES. 93 §70. Guaranty covers interest. A guarantor is liable for interest on the debt from tbe time of the default by thei principal.*^ This liability for inteo-est increases the amount named as the penalty of the obligation, but is justified because of the fact that the guarantor puts himself in place of the principal and agrees to perform all that the principal is liable for. Also the ■guarantor may eixercise his right to pay the debt at maturity and so avoid all obligation of interest to the creditor. Interest is due from the date of demand on the principal, or from the maturity of the debt where demand is not necessary to fix the time of paymeat. If the debt is due upon demand, and no demand is made upon the principal, the bringing of an action against the guarantor or surety wiW amount to a demand upon them vsrhich will fix the date from which interest will be computed.** vs. Ball's Adm., 18 B. Mon. 816; Burgoyne vs. Ohio Life Ins. & Trust Co., 5 0. S. 586. The estate of the deceased obligor is discharged at common law even though a joint judgment had been entered against him and the princi- pal before the death of the promisor. Eisley vs. Brown, 67 N. Y. 160. It seems, however, where a judg- ment upon a joint obligation be- comes a lien on the obligor's land in his lifetime that it will be- pre- served against his estate. Baskin vs. Huntington, 130 N. Y. 313; 29 N. E. 310. In Ohio the Code now provides that "When two or more persons are indebted in a joint contract, or upon a judgment founded on it, and either of them dies, his estate shall be liable therefor as if the contract had been joint and several, or as if the judgment had been against himself alone." Gen. Code. See. 10733. This statute abrogates the common law rule and similar provisions have been enacted by the legislatures of nearly all the States. .Some modifications of the common law rule were made by courts of equity in cases where the deceased joint obligor, participated in the benefits of the contract, such as a joint maker of a promissory note, where the consideration was for the joint use and benefit of the makers. In such cases, the court construed the obligation as joint' and several by employing a fiction that since the contract was jointly and severally for the benefit of both, that it must have been intended for a, joint and several obligation, and written ,by mistake as a joint contract. Simp- son vs. Vaughan, 2 Atk. 31; Bishop vs. Church, 2 Ves. 100. But the courts declined to extend the fiction to cases where one of the joint obligors was not directly bene- fited by the contract, as in the case of a suretv or Guarantor. Getty vs. Binsse, 49 X. "Y. 38.5 ; Wood vs. Fisk, 63 N. Y. 245; Carpenter vs. Broost, 2 Sandf. 537; 'Weaver vs. Shyrock, 5 Serg. & E. 262. 83 Gammell vs. Parramore, 58 Ga. 54; Gridley vs. Capen, 72 111. 11; City of Xew Orleans vs. Clark, 95 U. 'S. 644; French vs. Bates, 149 Mass. 73; 21 N. E. 237. 81 U. S. vs. Curtis, 100 U. S. 119; Sampson Co. vs. Commonwealth, 208 Mass. 372; 94 N. E. 473; Empire State Surety Co. vs. Lindenmeier, 54 Colo. 497; 131 Pac. 437. Where the obligation is that of a bail bond in which the amount pay- able is a penalty as distinguished from a debt, interest is not recover- able against the promisor. U. S. vs. Broadhead. 127 U. S. 212; 8 S. Ct. 1191. But see McMullen vs. Win- field Building & Loan Assoc., 64 94 THE LAW OF SUFETYSHIP. A surety whose undertaking obligates him contingently for unliquidated damages is not considered as in default until notice or demand, and interest does not begin to run upon the amount until then. **" §71. Eevooation of guaranty. A contract of guaranty which is merely executory, may be revoked by the guarantor at any time before it is acted upon. So far as affected by this question an executory contract of- guaranty may be considered as a mere offer to contract, and not binding until acted upon, and may be withdrawn even though the creditor has given notice to the promisor that he will act upon it. Such notice by the creditor, even in the form of an acceptance of the guaranty, will not bind the creditor to make advances to the principal, and so long as both parties are not bound either may withdraw.*' Where the consideration has wholly passed the guaranty can not be revoked. *° It is not necessary that the creditor should actually make the proposed advances in order to constitute an executed contract. If the creditor has bound himself to make the advances rely ing upon the guaranty, the guarantor cannot revoke; Where the consideration is divisible, part of which has been ad- vanced, the guaranty may be revoked, after a breach, as to any further advances, providing such future advances are optional with the creditor."' A revocation will not in all cases become instantly operative. A reasonable time must intervene, that the creditor may have opportunity to adjust his business without loss. A guaranty, for instance, of the faithful performance of duty by one hold- Kan. 298; 67 Pao. 892, where it Co., 201 Pa. 583; 51 Atl. 379; Mc- was held that "While the penalty Donald v. Loewen, 130 S. W. 52; of the bond fixes the limit of liabil- 145 Mo. App. 49; Empire State ity of the surety at the time the Surety Co. vs. Lindenmeier, 54 Colo, liability arises, yet if the principal 497; 131 Pac. 437. or surety fail, to discharge that lia- ss Potter vs. Gronbeclc, 117 111. bllity when it matures, interest may 404 ; 7 N. E. 586 ; Offord vs. Davie, be allowed on the amount from the 12 J. Scott (N. S.) 748; Jordan vs. time the liability arises, even if the Dobbins, 122 Mass. 168. amount of recovery shall exceed so Green vs. Young, 8 Me. 14; Ker- the penalty." nochan va. Murray, 111 N. Y. 306; 810 United States v. Quinn, 122 18 N. E. 868. Fed. 65; 58 C. C. A. 401; Folz vs. s? LaRose vs. Logansport Bank, Tradesman's Trust & Savmg Fund 102 Ind. 332; 1 N. E. 805; Hunt vs. COMMEKCIAL GUAEANTIBS. 95 ing a position, of trust mil cover damages to tlie creditor for a reasonable time after notice of revocation.'* The death, of the guarantor operates as a revocation of the guaranty in all cases where the guarantor might if living have revoked by giving notice.'" The death of the guarantor does not ipso facto operate as a revocation, but knowledge of the death must be brought home to the creditor. °° The death of the guarantor will operate as a revocation even Roberts, 45 N. Y. 691; Emery vs. Baltz, 94 N. Y. 408; Gay vs. Ward, 67 Conn. 147; 34 Atl. 1025; Singer Mfg. Co. vs. Draughan, 121 N. C. 88; 28 S. E. 136; Metropolitan Washing Machine Co. vs. Morris, 3!) Vt. 393; Tischler vs. Hofheimer, 83 Va. 35: 4 S. E. 370; Coulthart vs. Clementson, 5 Q. B. Div. 412; Mam- erow vs. National Lead Co., 206 111. 626; 69 N. E. 504. 88 Bostwick vs. Van Voorhis, 91 N. Y. 353 ; Keilly vs. Dodge, 131 N. Y. 153; 29 N. E. 1011; LeRose vs. Logansport Nat. Bank, 102 Ind. 332 ; 1 N. E. 805; Vidi vs. United Surety- Co., 140 N. Y. S. 612. 89 Jordan vs. Dobbins, 122 Mass. 168; Hvland vs. Habich, 150 Mass. 112; 22 N. E. 765; Valentine vs. Donohoe-Kelly Banking Co., 133 Cal. 191; 65 Pac. 381. / Contra — Bradbury vs. Morgan, 1 Hurl. & Colt. 249. See also Broome vs. The United States, 15 How. 143; Fewlass vs. Keeshan, 88 Fed. Rep. 573; McClaa- ky vs. Barr, 79 Fed. Rep. 408. Lloyds vs. Harper, 16 Ch. Div. 290, Lush, L. J.: "Now it will be found, I think, that guarantees may, for the purpose of this case, be di- vided into two classes, the one in which the consideration is entire, and the other in which the consider- ation is fragmentary, supplied from time to time, and therefore divis- ible. An instance of the first is where a person enters into a guar- antee that in consideration of the lessor granting a lease to a third person he will be answerable for the performance of the covenants. The moment the lease is granted there is nothing more for the lessor to do, and such a guarantee as that, of necessity runs on throughout the duration of the lease. The lease was intended to be a guaranteed lease, and it is impossible to say that the guarantor could put an end to the guarantee at his pleasure, or that it could be put an end to by his death contrary to the manifest in- tention of the parties .... instances of the second class are more familiar. They are where the guaranty is given to secure the bal- ance of a running account for goods from time to time, and it is reason- able to hold, unless the guarantee stipulates to the contrary, that the guarantor may at any time termi- nate the guarantee." See also Bal- four vs. Crace, 2 Ch. 733 [1902]. «<'Gay vs. Ward, 67 Conn. 147; 34 Atl. 1025. Contra- — Michigan State Bank vs. Leavenworth Est., 28 Vt. 209. Not only must the creditor have knowledge of the guarantor's death, but in order to have this work a revocation of the guaranty, he must have knowledge also of the fact that the deceased was a guarantor. Clark vs. Thavcr, 105 Mass. 216. 96 THE LAW OF SURETYSHIP. though the contract stipulates that it shall continue until a written notice of revocation is received.''^ SI Jordan v. Dobbins, 122 Mass. 168; Nat. Eagle Bank vs. Hunt, 16 R. I. 148; 13 Atl. 115. Contra — ^Knotts vs. Butler, 10 Rich. Eq. (S. C.) 143; Pond vs. U. S. Ill Fed. 989; 49 C. C. A. 582. The death of one of several joint obligors will not, however, operate as a revocation as to the surviving obligors. Breckefct vs. Addyman, 9 Q. B. Div. 783. The obligation in this case was joint and several. But see also Fennell vs. McGuire, 21 Up. Can. (C. P.) 134; where the obligation is joint and the same rule is applied. CHAPTER IV. SURETYSHIP DEFENSES Material Alteration of Principal Contract. Same Subject Continued. Same Subject Continued. Alteration of Principal Contract by the addition of new parties. Alteration of Principal Contract by a, change in the duties of the principal. ' 79a. Building Contracts. 7'6b. Building Contracts — Changes in the Manner of Payment. Variation in amount of advancements under limited guaranty — Effect upon guarantor. Change of parties. Alterations beneficial to the surety or guarantor. Alterations enlarging the principal liability. Discharge of promisor by extension of time. Agreement for extension must be for a consideration. Payment of advance interest as a- consideration for extension. Agreement for extension must be for a definite time. Extension of time by the execution and delivery of a note for the debt, payable at a. later date. Collateral securities maturing at a later date. Extension of time by act of Legislature. Giving time to Surety — Effect upon Co-Surety. Giving time is not a defense, if the Surety is fully indemnified. Extension of time as a defense to persons who are in the sit- uation of a Surety. Extension by appeal or continuance in judicial proceedings. 9ia. Extension of time as a defense under Negotiable Instrument Codes. Extension of time with reservation of rights against the Surety. Agreements not to sue as distinguished from agreements to, extend — Effect upon Surety. Waiver of the defense of extension of time. Delay of the Creditor in pursuing remedies against the Prin- cipal as a defense to the surety or guarantor. Sec. 9'6. Paymeiit or other satisfaction as a discharge of the Surety or Guarantor, fiec. 97. Liability against Surety or Guarantor revived if payment or substituted surety is void. Sec. 98. Voluntary release of security held by the creditor or upon which the creditor has a lien. Sec. 99. Eelease of securities by the misconduct of the creditor. Sec. 100. Release of securities by operation of Law. Sec. 101. Eelease by the Creditor of Property of Principal in his pos- session or control, but not held as security for the Suretyship debt. Sec. 102. Whatever releases principal will release the surety or guarantor. Sec. 103. Same Subject — Eelease of principal by operation of law. Sec. 104. Same Subject — 'In cases where the release by operation of law is not the result of the fault or procurement of the Creditor. 97 Sec. 72. See. 73. Sec. 74. Sec. 75. Sec. 76. Sec. 79a. ■Sec. 76b. Sec. 77. Sec. 78. Sec. 79. Sec. 80. Sec. SI. Sec. 82. Siec. 83. Sec. 84. Sec. 8.5. Sec. 86. Sec. 87. Sec. 88. Sec. 89. Sec. 90. Sec. 91. Sec. 9ia Sec. 92. Sec. 93. Sec. 94. Sec. 95. 98 THE LAW OF SURETYSHIP. S«c. 105. Suretyship obligations obtained by fraud of the creditor. Sec. 106. Same Subject — Concealment or non-disclosure of facta by the Creditor. Sec. 107. Discharge of promisor by failure to disclose facts coming to the knowledge of the creditor, after the execution of the con- tract. Sec. 108. Fraud and Misconduct of the Principal. Sec. 109. Misconduct of the Principal, by delivering Suretyship obliga- tions without complying with conditions. Sec. 110. Suretyship contracts made in reliance upon promises of the creditor. Sec. 111. Condit'onal contracts of Suretyship — Parol evidence not com- petent to show conditions. Sec. 112. Same Subject — Parol evidence competent in certain cases. Sec. 113. Eelease of promisor by the creditor. Sec. 114. Eelease of a Co-promisor by the creditor. Sec. 115. Defense of the promisor based upon the failure of the creditor to sue the principal when requested. Sec. 116. Same .Subject— The doctrine of Pain vs. Packard. Sec. 117. The principal's right of set-oflf or counterclaim against the creditor as a defense to the promisor. Sec. 118. Defenses based upon the right of the promisor to control the application of collateral. Sec. 119. Revocation — Death of the promisor. |72. Material alteration of principal contract. A material alteration of a contract is such a change in the terms of the a^eement as either imposes some new obligation on the party promising or takes away some obligation already imposed. A change in the form of the contract which does not effect one or the other of these results is immaterial, and will not discharge the surety." Any change in the terms of the principal contract which obliges the debtor to do something which he was not before bound to dp will discharge the surety or guarantor.^ This is said to result from either one of two reasons: a Rankin vs. Tygard, 198 Fed. W. 209; Hamm vs. Paean, 128 P. 795; 119 C. C. A. 591; New Haven 141; 36 Okl. 223. vs. National Steam Economizer Co., Under the Uniform Negotiable 79 Conn. 482; 65 Atl. 959; Wilkin- Instrument Codes what are material son vs. MeKimmel, 36 App. D. 0. alterations and the effect thereof 336; Mudd vs. Shroader, 152 Ky. are controlled largely bv the statute 696; 154 S. W. 21. as adopted in each' state, and the iBoalt vs. Brown, 13 0. S. 364; decisions thereunder, which are in Patterson vs. McNeely, 16 O. S. 348; a state of flux. A critical examina- Waterman vs. Vose, 43 Me. 504; tion of the statutes and decisions McGrath vs. Clark, 56 N. Y. 34; In each state is recommended. See Dewey vs. Reed, 40 Barb. 16; Hart ante, iSiecs. 7, 8, 9, 10, and notes, vs. Clouser, 30 Ind. 210: Hesself and post, See. 91a. vs. Johnson, 63 Mich. 623; 30 N. STIRETTSHIP DEFENSES. 99 (1) It is an increase of the promisor's risk or hazard. The addition, of new burdens upon the principal may be the cause of his failure to perform any part of his contract. The new conditions or terms might, indirectly at least, render im- possible the carrying out of the things which were the subject of the guaranty. (2) The contract as changed is not the same contract guar- anteed by the promisor. The original contract has been put an end to and a new one substituted. The guarantor has never agreed to stand good for the latter, and suretyship cannot be •imposed without the express consent of the promisor, and his execution of the original contract will not carry by implica- tion any liability upon a substituted contract, although the latter is similar to the first. Either one of these reasons is a satisfactory ground upon which to rest the discharge of the promisor, and both are abundantly supported by authority. The suggestion, however, that a new contract has been substituted entirely supersedes the first reason given. It is of no importance to consider whether the risk of the promisor has been increased or not, if the prom- isor is to be discharged for the reason that his contract has been ended. §73. Same subject continued. If the alteration consists in relieving the principal of some obligation included in the original contract, or if new obliga- tions have been added and liabilities equal in amount can- celled, so that the new contract imposes no greater burdens or risk than the original, or if the added obligations can be shown to be merely nominal, and which do not in any way increase the risk of the promisor, then the question of the discharge of the promisor must rest wholly upon the proposition of a sub- stituted contract, and many courts have been willing to stand solely upon this ground. In an early English ease H contracted for the milking of thirty cows for a yeal- and J was surety. The parties to the principal contract changed the terms so that H was to have 100 THE LAW OF SUEETYSHIP. twenty-eight cows for one part of the year and thirty-two for the other. This was apparently not a substantial change as the average of thirty remained, but the Court discharged the surety, holding : " The new agreement was binding only on those persons who were parties to it. If it had been intended to bind J by it, he should have been consulted ; he had a right to insist upon a literal performance of the original bargain. If a new bargain was made, he had a right to exercise his judgment whether he would become a party to it There may, perhaps, be very little difference between the two contracts, but the question does not turn on the amount of the difference ; but the question is, whether the contract performed by the plaintiff is the original contract to which the defendant was a party. If it is, then J is bound by it, otherwise he is not." ^ 2 Whitdier vs. James Hall, 5 Barn. & Cr. 269' (18a&). "No principle of law is better set- tled at this day, than that the under- taking of the surety, being strioti juris he cannot, either at law or in equity, be bound farther or other- irise, than he is by the very termfl of his contract. . . . He is not bound by the old contract, for that has been abrogated by the new; neither is he bound .by the new con- tract, because he ,1s no party to it. .... Neither is it of any conse- quence that the alteration in the contract is trivial, nor even that' it is for the advantage of the surety. Kon haec in foedera veni, is an an- swer in the mouth of the surety, from which the obligee can never extricate his case, however inno- cently or by whatever kind inten- tion to all partieSj he may have been actuated." Bethune vs. Dozier, 10 Ga. 23.5. This rule is somewhat modified in states where the distinction between the individual and the compensated corporate surety prevails. See Young vs. American Bonding Oo., 228 Pa. 3T3; 77 At. 633. Steioart, J. "The trend of all our modern decisions, federal and state, is to distinguish between individuals and corporate suretyship where the lat- ter is an undertaking for money con- sideration by a fcom'pany chartered for the conduct of such business. In the one case the rule of strictisximi juris prevails, as it always has; with respect to the other, because it is essentially an insurance against risk, underwritten for a money con- sideration by a , corporation adopt- ing such business for its own profit, the courts generally hold that such a company can be reliefved from its obligation of suretysliip only where a departure from the contract is shown to be a. material variance. .... It follows that there is but one way by which it is to be deter- mined whether the variance conn- plained of was a material variance. The test is to be found in the answer to the question, whether it substaav- tially increased the chances of the loss insured against It is not a question whether the variance actually caused the breach of the bond; but whether it was such a variance as a reasona'bly careful and prudent person undertaking the risk would have regarded as substan- tially increasing the chances of loss." City of Philadelphia vs. Eay, 266 Pa. 345; 109 Atl. 689. See also -post, iSecs. 233, 234. See also Warden vs. Ryan, 37 ilo. App. 466; Atlanta National Bank vs. Douglass, 51 Ga. 205; Weir Plow Co. vs. Walmsley, 110 Ind. 242; 11 N. E. 232; Dey vs. Martin, 78 Va. 1; CSiristian & Gunn vs. Keen, 80 Va. 369; Rowan vs. Sharps' Rifle Mfg. Co., 33 Conn. 1 ; Eyre vs. Hol- lier, Lloyd & Gould, 250; St. Louis Brewing Assn. vs. Hayes, 71 Fed. Rep. 110; Parke vs. White River Co., 110 Cal. f;.3S; *3 Pao. 202; Ches- ter vs. Leonard, 68 Conn. 495; 37 Atl. 397; Plunkett vs. S'ewing Jla- chine Co., 84 ild. 529; 36 Atl. 11.5; Prior vs. Kiso, 81 ilo. 241 ; Evans STTEETTSHIP DEFENSES. 101 If the alteration consists in a change in the' place of pay- ment it adds an obligation to pay at a place not stipulated in the original agreement and relieves the principal from the obligation to pay at the place first stipulated. Generally this alteration would not in any way increase the risk or change the position of the principal, but the promisor in suretyship is not liable upon such substituted contract^ The changing of the date of maturity, whether it hasten or delay the time of payment, is a material alteration,* and on groimds of public policy a change of the date of commercial paper is a material alteration, even though the date as changed expresses the real agreement of the parties. To hold other- wise would operate against the unrestricted use of negotiable paper as a medium of commercial transactions. It is of the highest importance to preserve the integrity of written instru- ments, and one who has the custody of such instruments in- tended for his own benefit is bound to preserve them intact." vs. Graden, 125 Mo. 72; 28. S. W. 439; Gardner vs. Watson, 76 Tex. 35; 13 S. W. 39; Nichols vs. Palmer, 48 Wis. 110; 4 X. W. 137; Titus vs. Durkee, 12 Up. Can. (C. P.) 367. It was held in Sanderson vs. As- ton, L. R., S Ex. 73, that it is not sufficient to discharge the surety that the alteration be "material" merely in the. sense that it imposes a new contract, but that the change must be prejudicial to the surety, and that an alteration in the princi- pal contract, changing the period within which notice to quit employ- ment could be given, from one month to three months, was not material since the risk of the surety was not thereby affected. 3 Pa'hlman vs. Taylor, 7-5 111. 629. iWood vs. Steele, 6 Wall. 80, Sit-ayne, J.: "The grounds of the discharge in such cases are obvious. The agreement is no longer the one into whicli the defendant entered. Its identity is changed: another is substituted without his consent; and by a. party who had no author- ity to consent for him. There is no longer the necessary concurrence of minds." Brannum Lumber Co. vs. Pickard, 71 X. E. 67fi : 33 Ind. App, 484. 5 Ne-wman et al. vs. King, 54 0. S. 273; 43 X. E. 683. In this case the payee changed the date, making the note read June 23rd, in place of June 22nd, the former being the date on which the note was Avritten and signed and the date which the parties themselves intended the note sihould bear, and the alteration was to correct the mistake. The Court held: "Delib- erate tampering with written instru- ments by their obligees upon any pretence whatever should not be encouraged. "If the right to do so in respect to any material matter should be established the principle by which satisfactory limits can be 'fixed to such right are not apparent. . Where, by mistake, a written instru- ment does not conform to the inten- tion of the parties, and they can not agree respecting the mistake and its correction, an adequate rem- edy has been provided according to the principles of equity jurispru- dence, by courts having jurisdiction to correct such mistakes where rules of evidence appropriate to establish the fact of mistake are prescribed and enforced." l-!iit soe Diiter vs. Fran?, 7 Bush, (Ky.) 273; MeEaven vs. Crisler. 6>3 Miss. .i42. 102 THE LAW 'op suretyship. Pasting to the original contract a memorandum of an in- dependent collateral agreement between the parties, which is intended to clarify one of the provisions in the contract doea not discharge the sureties.^" §74. Same subject continued. The same effect will be given to a material alteration of ne- gotiable paper, although the alteration takes place before de- livery of the paper to the payee, and before the paper has acquired any validity against the maker. The surety or guar- antor not consenting to such change will be discharged." It is, however, urged that the execution of the suretyship contract and the intrusting of the contract to the principal for delivery to the creditor carries with it an implied authority to make such changes as will enable the. principal to carry out the main purpose of the transaction ' and that in any event where the creditor makes his advancements without knowledge of the alteration the promisor should be estopped from claim- ing his discharge, since, as between two innocent parties, the one should bear the loss whose act made it possible for the other to be misled. The rule which authorizes the holder of paper delivered to him in defective form or incomplete by reason of blanks left unfilled, should not be extended to that class of cases where the 5a United States Glass Co. vs. But see National EjKjliange Bank Mathews, 80 Fed. 828. See also vs. Lester, 194 N. Y. 461'; 87 N. E. Cambridge Savings Bank vs. Hyde, 770, where it is held that by virtue 131 Mass. 77. of the negotiable instruments code 6 Jones vs. Bangs, 40 O. S. 139 ; payment of p, note which has been McGrath vs. 'Clark, 96 N. Y. 34; altered may be enforced by a bona Eh'aper vs. Wood, 112 Mass. 315; fide holder according to its original Bradley vs. Mann, 37 Mich, li; Aetna tenor. Niat. Bank vs. Winchester, 43 Conn. ' It is held that the delivery of a 391. bond by the surety to the principal This is the rule even as against establishes the relations of agency bona fide purchasers for value be- between these parties, and the sure- fore maturity. Hill vs. O'Neill, 101 ty will be bound by any alteration Ga. 832 ; 28 S. E. 996 ; Simons & Oo. made by the principal before deliv- vs. McDowell ; 12B Gu. 203 ; 53 S. ery, not communicated to or known E. 1031. by the obligee, and tbat having thus Contra — Hackett vs. First Na- held out the principal as his agent, tional Bank of Louisville, 114 Ky. the surety is estopped from claiming 193; 70S. W. 664; Isnard vs. Torres that he has exceeded his authority A MarqueZj 10 La. Ann, 103. as such agent, as against one who SURETYSHIP DEFENSES. 103 paper is not defective, but delivered with all the terms fully written in which are necessary to a completed contract. There is no room for the application of the rule of implied authority or estoppel in such cases.' There is no difference in principle between cases of altera- tion by the debtor and alterations by the creditor. In either case, the discharge of the promisor may be based on the fact that a new contract has been substituted, or the risk increased, and it can make no difference to the promisor whose act caused this result. Only those alterations which are made by the has relied upon his apparent author- ity, and that the surety should not be permitted to transfer the burdens resulting from misplaced confidence in his agents. King County vs. Ferry, 5 Wash. 536; 32 Pac. 538. See also Fowler vs. Allen, 32 l9. C. 229; 10 S. E. 947. If the contract is delivered to the principal in an incomplete state leaving blanks to be filled in, the defense of alteration is shut out both on ,the ground of agency and estoppel, even though the principal fill in the blanks contrary to in- structions. White vs. Duggan, 140 Mass. 18; 2 N. E. 110. Where the instrument bears upon its face evidence that the principal is exceeding his authority as an agent, the surety may maintain his defense. Fletcher vs. Austin, 11 Vt. 447; Staith vs. United States, 2 Wall. 219; (State vs. Craig, 58 Towa 238 ; 12 N. W. 301 ; Hessell vs. John- son, 63 Mich. 623; 30 N, VP. 209; Allen vs. Marney, 65 Ind. 399; Ward vs. Churn, l8 Gratt. 801; Mc- Connon & Co. vs. Evans, 152 Ky. 491; 153 S. W. 773. * The rule stated in the text must be distinguished from those trans- actions in which the surety or guar- antor signs upon conditions not com- municated to the creditor. In such cases, estoppel is properly urged against the defense, for if fraud has been practiced by the principal, in • delivering the contract contrary to instructions, and without disclosing to the creditor the limitations under which the promisor signed, the one who made such deception possible by placing the contract in the hands of the principal, should sufTer the loss, rather than the one who made the advancements relying upon the contract being what it purported to be. Such now seems to be the es- tablished rule in the United States. iState vs. Peck, 53 Me. 284; Fowler vs. Allen, 32 iS. C. 229; 10 S. E. 947; Tidbal! vs. Hally, 48 Cal. 610; Marks va. First Nat. Bank, 79 Ala. 550; State vs. Potter, 63 Mo. 212; Dair vs. United States, 16 Wall. 1; Millett vs. Parker, 2 Met. (Ky.) 608. Post, iSec. 108. Contra — People vs. Bostwick, 32 N. Y. 445; Hackett vs. First Na- tional Bank of Louisville, 114 Ky. 193 ; 70 S. W. 664. "One who signs a note as surety in which are writ- ten the words 'five hundred' with spaces before and after them, which the maker fills up by writing 'twen- ty' before and 'fifty' after them, thereby making the note for $2,550, is liable thereon to a bona fide pur- chaser." Isnard vs. Torres & Mar- quez, 10 La. Ann. 103. The material alteration of a promissory note by a stranger is a mere spoliation of the instrument. Under the Uniform Negotiable In- struments Codes payment thereof may be enforced accordinsr to its original tenor. National Exchanee Bank vs. Lester, 194 N. Y. 461 ; 87 N. E. 779, 21 L. R. A. (N.S.) 402n: 16 Ann. Cas. 770. 104 THE LAW OP SURETYSHIP. principal or creditor acting for themselves or through author- ized representatives will operate to discharge the surety or guarantor. Any change or mutilation that is the result of ac- cident or the act of a stranger will not effect the liability of the promisor." The question is somewhat mooted in this country whether the absence of fraudulent intent will render a material altera- tion ineffective when the holder asserts his claim upon the paper as if in its original form. Aside from the question of accident or mistake, it is difficult to find any distinction in principle between alterations made with intent to defraud and alterations made without such intent, provided in both cases there was an intent to change the contract.^" If the alteration is the result of mistake or accident a court of equity at the suit of the holder would undoubtedly reform the instrument.^'- 9 Anderson vs. Bellenjcer, 87 Ala. 3J4 ; 6 South. 82 ; State vs. McGoni- gle, 101 Mo. 353; 13 S. W. 758; Murray vs. Graham, 29 Iowa, 520; Brooks' vs. Allen, 62 Ind. 401. 10 In Croswell vs. Labree, 81 Me. 44: 16 Af.l. 331, the holder of the paper changed the contract, which was a note payable to order, by add- ing the words "or bearer" and the court, while hoJding the alteration material announced the view that such alteration was ineffective if made innocently without any intent to defraud, but that the burden of showinig that the alteration was without intent to defraud was on the holder. In. Toomer vs. Rutland, 57 Ala. 379, the holder received a note with the place oi payment left blank and filled in this blank by naming a bank as the place of payment. Held "The motive of the creditor in mak- ing the alteration may not be fraud- ulent — as in the present case, mala fides may not be imputable to liim; yet, as the alteration changes the legal identity and effect of the in- strument, the debtor may well say it is not the contract into which he entered, and he is not, therefore, bound by it, and that the identity and legal effect of the contract into which he did enter, has been volun- tarily destroyed by the creditor." See also Bigelow vs. Stilphen. 3.? Vt. .521; Savings Bank vs. Shaffer, 9 Neb. 1 ; IN. W. 980 ; Taylor vs. Taylor, 12 Lea (Tenn.), 714; New- man vs. King, 54 0. S. 273 ; 43 N. E. 683. In Booth vs. Powers, 56 N. Y. 22, the question) of fraudulent intent is held of no moment in determining the effect of the alteration on the validity of the instrument. But if the holder can show that the altera- tion was made innocently to correct a mistake or to conform to the real intent of the parties, he may resort to an action upon the original debt providing the execution of the note did not extinguish the debt; where- as, if the alteration was fraudulent- ly made the holder forfeits the debt altogether. To the same effect, see Clough vs. Seay, 49 Iowa 111; Clute vs. Small, 17 Wend. 238; Matteson vs. Ells- worth, 33 \Yis. 488; Hunt vs. Gray, 35 N. J. L. 227. Of course, the promisor in surety- ship is not in any way affected by this modification, giving the creditor a right of action against the princi- pal on the original debt where the alterations were innocently made. The liability against the promisor is inseparably connected with the writen instrument, which is vitiat- ed by the alteration discharging the promisor. 11 Chadwick vs. Eastman, 53 Me. 16. SURETYSHIP DEFENSES. 105 Such a procedure is more in accord with the policy of our law than for the holder to make the alteration and then rely upon the court to ratify his act when an action is brought. An im- material alteration, although made with fraudulent intent, may be disregarded.^^ § 75. Alteration of principal contract by the addition of new parties. The addition of a new party as principal maker is a material alteration of the principal contract and the promisor not con- senting is discharged. This is but a direct and simple appli- cation of the rule that the promisor is not liable in a substi- tuted contract. The addition of a new name as maker might change a several contract to a joint and several, but whether the added party resulted in this or some other change in the contract, the instrument would operate differently in respect to all the parties from the moment the name was added, and circumstances might even be conceived which would make the addition of a new party prejudicial to the surety or guarantor ; generally, however, such alteration would be beneficial to the promisor. The decided weight of authority is that the addition of a new party constitutes such material alteration as will discharge the surety or guarantor.^^ i2Moye vs. Herndon, 30 Miss. 110. maker does not diangiei in any ■way Contra — Heard vs. Tappan. & Mer^ the obligation or relations of th'e ritt, 121 Ga. 437; 4& S. E. 263. origlinal maker, and that lie still re- 13 Wallace vs. Jewell, '21 0. S. mains sev-erally liable for the entire 163; Chadwick vs. Eastman, 53 Me. debt and hence as to him this is 12; Slhi'pp's Adm. vs. Suggett's not a material alteration. Adm., ft B. Mon. 6; Hall's Admx. vsi The distinction, however, between McHetary, 19 Iowa 521; Hamilton this case and the case where a new vs. Hooper, 46 Iowa 5'1'8; Gardiner party is added to a joint and several vs. Walsh, 5 El. & Bl. 83; Soaps n'ote is not apparent, for if the vs. Eichberg, 42 111. App. 376; original (parties sustain no contract- Keller vs. Rock Island State Bank, ual relations with the new parties 2921 111. o'53;, 127 N. E. ft4; Brown in the one case they would not in vs. Johnson Bros., 127 Ala. 292; 28 the other. In either case, the new So. oTO; Ranikiin vs. Tygard, IftS Fed. party is eitlier (a) liable with the 795; Swank vs. Kanifman, 255 Pa. original ^parties as joint makers, or 31«; 99 AtT. 1000; L. R. A. 1917D, (6) liable for the'ir debt as guaran- 826; Bank of Commwce vs. Webster tors. Under the firs't supposition (Okla.), 172 Pac. 942; L. R. A. 191SF, contractual reiI'a.tiions are established 696, and note at page CgiS, "Adding which did not before exist, and of another party to negotiable in- which justify the application of the strument after its execution and rule for the discharge of the surety, delivery as a. material alteration." if the question of increase of risk is In, Brownell vs. Winnie, 29 N. Y. to be left out of conslideration. 400, it waa held that the addition Under the second supposition, th'e of a new name as maker upon a original anakers remaini liable for note upon whidh theire is but one the entire am'ount without changing 106 THE LAW OF SURETYSHIP. Yet there is respectable authority that the addition of a new party as surety or guarantor is not a change of the principal contract. The undertaking of the new surety is merely col- lateral to the main contract and not incorporated into it and the principal remains in exactly the same relation to the creditor as before.^* The erasure by the obligee of a surety's name on a bond releases all sureties who sign after the surety whose name was erased and before the erasure.^*" § 76. Alteration of principal contract by a change in the duties of the principal. i surety upon a contract of employment, or upon a bond for the faithful performance of duty in a position of trust, or to secure the performance of any specified duty by the principal. in any respect their Telations to the creditors by rea'Son of the existence of the new collateral conitract of sureityship, and these results wo^ild seem to lie unaflfected hy th« fact as to whether the main contract was executed by a sole maker or by joinb makers. i^Mersman vs. "Wiergea, 110 U. S. 139; SI S. 'Ct. '65; McOaug'h.ey VB. iSmith, 27 N. Y. SS; Miller vs. Fin- I'ey, 261 Mich. 24'9; iStone vs. White, 8 Gray 3S9; State vs. Dunn, 11 La. An. 549; Ex Parte .Yates, 2 DeG. & J. 191; Standard Underground Oible Co. vs. Stone, 94 N. Y. S. 383; Hoilthouse vs. State, BT N. E. 130; 149 Ind. App. 1718'; Barnegi vs. McKerneni, 31 Neb. 165; Taylor vs. Acorn (Ind. Ter.), 4i5' S. W. 130; Rndulph vs. Brewer, 96 Ala. 189; II So. 314. Contra — Berryman vs. Manker, 66 Iowa 160; 9 N. W. 103; Bank of Limestone Bank vs. Penlck, 2 T. B. Mon. (Ky.) 98; M. Kumley Co. vs. Wilcher & Co., 23 Ky. Law Kep. 1745; ©6 S. W. 7; State vs. Paxton, 65 Neb. 110; 90 N. W. 983; Fry vs. Bannon Sewer Pipe Co., 101 N. E. 10; 179 N". E. 309; Brown vs. John- son, 127 Ala. 292; 28 So. 579; First Nat. Bank vs. Weidenbeck, 87 Fed. 271. ■ Soime distinction seems to be made where the additional surety signs before delivery of the instrument, and while it is in the hands, of the principal. The original surety is held to be estopped from claiming bis discharge because he intrusted the inistrument to the principal, thereby giving him implied author- ity to get additional parties if thte same became necessary. Keith vs. ■Goodwdn, 31 Vt. 26®. The further reason is sometimes ui^ed that if the new signature is made before delivery to the payee it does not amount to an alteration because until after delivery there is no contract. Ward vs. Hackett, 30 Minn. loO; 14 N. W. 076; Graham vsi. Rush, 73 Iowa 451, 35 N. W. Section 124 of the Uniform Negoti- able Instruments Act provides: "When an instrument has been materially altered and is in the hands of a holder in due course, not a party to the lalteration, he may enforce payment according to its original tenor." Sec. 125', Id., provides inter alia that "Any alter- ation which' changes the num'ber or relations of the parties is a 'matei-iali altenation." As resipects negotiable instruments these sections seem to have codified the law on the sub- ject, although there is a great con- flict of authority upon these questions. In Ohio these sections are held to apply only to. the physi- cal alterationi 'of a negotiable in- sltrument. Richards vs. Market Exchange! Bank Co., 81 O. S. 34Si; 90 N. E. 1000; 26 L. R. A. (N.S.) 99. i*<»Hilliboe vs. Warner, 118 N. W. 1047; 17 N. D. 594. But see Hess vs. Schnaffner, 139 S. W. 1024. / SURETYSHIP DEFENSES. 107 will not be bound for any default under a modified form of such contract.^*' If the parties to the main contract by agreement substi- tute other duties for the principal, although the general char- acter of the employment is not changed, the sureties can not be held for^a breach of these added duties. Where the contract between employer and employe requires the employe to render reports of business done eaeh week, a waiver by the employer of the weekly settlements will discharge the sureties on the bond of the employe.'*" Thus a surety upon the bond of a bookkeeper in a bank will not be liable for defaults committed by the principal when pro- moted to the position of receiving teller.^' Again, where a lease provided that the premises shall be given up at the end of the term in the same condition as when received. The guarantor was held to be discharged by a con- temporaneous agreement between the lessee and lessor that the latter should remodel the building before taking possession. ';' A guaranty of a contract of sale of merchandise upon a credit of six months will not hold good for a sale made on credit of less or more than six months.'^ "»Pott & Co. vs. Schmucker, 84 Where the requirements changed Md. 535; 36 Atl. 592; Orleans & J. ^ere not such aa were essential ' ' ingredients in the contract of surety, Ey. Co. vs. International Const. Co., the surety is not released. Ami- 113 La. 409; 37 So. 10'; Despres vs. cable, etc., Ins. Co. vs. Sedgwick, •mi T>A T^^ A ni /-^ J t,„ HO Mass. 163; Harper vs. National Polz, 134 111. App. Ill; Cudahy j^.^^ j^^^_ ^^^ gg £^ 2^^. j^^^^. Packing Co. vs. Shepard, 37 Tex Civ. ford Fire Ins. Co. vs. Casey, 196 AT>p. 1; S3 S. W. 786; Kirschbaum Mo. App. 291, 298; 191 S. W'. 1072. , „ „, . ^^ ^j. „r. „. a T, iBjSTational Mechanics Bankiiv^ & Co. vs. Blair, 96 Va. 95; 34 S. E. ^gg„_ ^g_ Conkling, 90 N. Y. 116- m5 ; City of New York vs. Clark, Kellogg vs. Scott, 58 N. J. Eq. 344 ; 82 N. Y. S. 855; Chandler Lumber 44 Atl. 190. /-. T, „ ,„« TTT- .„^ -.^^ But see Hibernia Savings Bank Co. vs. Radke, 136 Wis. 49i5; 118 ^g_ McGinnis, 9 JIo. App. 578, N. W. 185; Germania Fire Ins. Co. where it was held that "wliere a vs. Lange, 193 Mass. 67; 78 N. E. bank teller is made cashier, that he -.- continues to act as teller does not increase the risk of the sureties on i« Singer Mfg. Co. vs. Boyette, 74 ^is bond as cashier, and will not Ark. 600; 86 S. W. 673 ; Morrison vs. discharge them." Arons, 65 Minn. 321 ; 68 N. W. 33 ; ^^ Farrar vs. Kramer, 5 Mo. App. Fidelity Mutual Life Assoc, ve. l^J\s^'^ ct'°m'^''' ^^' ^°^^' ^^ Dewey, 83 Minn. 389; 86 N. W. 429. ^n Leeds vs. Dunn, 10 N. Y. 469; Henderson vs. Marvin, 31 Barb. 297; Stewart vs. Rannev, 26 How. Pr. 279; 68 0. IS. 407; "67 N. E. 719. 107a THE LAW OF SURETYSHIP. A change in the character of the raerchemdise guarantied will discharge the guarantor.^* An alteration of the principal contract without the consent of the surety discharges the surety only for defaults arising after the alteration or change is made.^*" Where new duties are given public officers by subsequent legislation the sureties upon the bond of the officer have been held to be discharged.^" The fact that a portion of an order of goods proved defective in quality and was returned by the purchaser witTiout the consent of a guarantor will not operate as a change in the contract of purchase so as to relieve the guarantor of his obligation to pay for that which was received in good order."" §76a. Building contracts. The rule that an alteration of the principal contract releases the surety has been relaxed in the case of building contracts by the application of a construction peculiar to contracts of IS Grant vs. Smith, 46 N. Y. 93. not such a material alteration as The guarantied contract was for a would discharge the surety upon steam engine and two boilers and It the agent's bond, was modified so as to require the Contra — Good Roads Machinery delivery of an engine and three boil- Co. vs. Moore, 58 N. E. 540 ; 25 Ind. ers. ^PP- 4"9- In Evans vs. Lawton, 34 Fed. Eep. i^* Lake vs. Thomas, 84 Md. 608 ; 233, a contract of agency provided 36 Atl. 437; White River, L. & W. that the agent was to sell only for R. R. vs. Star R. & L. Co., 77 Ark. cash. Evidence that the employer 12.S; SS .S \-\\ 9.m. had knowledge of the fact that the i" Miller vs. Stewart, 9 Wheat, agent was selling on credit, and in 680; Denio vs. State, 60 Miss. 949; some cases consented to it, was held Bensinger vs. Wren, 100 Pa. 500 ; to be a, material alteration which State of Missouri vs. Holman, 96 discharged the guarantor. Mo. App. 193; 68 S. W. 06."). But see Fond du Lac Harrow Co. i**" Groendyke vs. Musgrave. 123 vs. Bowles, 54 Wis. 425; 11 N. W. Iowa 535; 99 X. W. 130. 79'5, vpihere it is held that an en- -" Geo. A. Hormel & Co. \s. Amer- largement of the territory in which ican Bonding Co., 112 Minn. 288; 128 the agent was permitted to sell was N. W. 12; Brandrup vs. Brazier, SURETYSHIP DEFENSES. 1076 Tf alterations are slight and trivial, the surety will not be released, even though not consenting, such changes being deemed incident to any building operation and contemplated by the parties,^"" and by extension of this principle, changes which involve no prejudice or loss to the surety do not release the non-consenting surety. Thus where the owner agreed to insure the building under construction for the benefit of himself and the contractor, as their interest might appear, and without the knowledge or consent of the surety, placed the insurance for the benefit of a mortgagee, it was held, no fire having occurred, that the surety was not released,-'"' So also, where there has been a change of location of the building from one lot to another, and not involving additional expense to the contractor.^"" These relaxations of the rule are, however, limited to those cases in which the surety company is compensated and engaged in tlie business of suretyship. This distinction has been stated thus: "The rule that where changes in a building contract made without the consent of the surety of the contractor afEect the identity of the contract, the surety is discharged, though the changes do not increase the risk of the surety, does not apply where the surety is engaged in the business for hire, and in. Ill Minn. 376; 127 N. W. 424; Trust, etc., Co., 170 Ky. 601; 186 Young vs. American Bonding Co., &. W. 494; LsuJies of Maccabees 228 Pa. 373. vs. Illinois iShirety Co., 196 Mich. 20o Hohn vs. Shideler, 164 Ind. 27 ; 163 N. W. 7. 242; 72 N. E. 575; Kunzweiler vs. A surety for profit may not de- Lehman, 70 N. Y. S. 290; Stephens mand a release for every variance vs. Elver, 101 Wis. 392; 77 N. W. in terms or performance of the 737; Fullerton Lumber Co. vs. principal contract, Hileman & Gint Gates, 89 Mo. Apps. 201; Cooke vs. vs. Fans, 176 Iowa 644; 158 N. W. White Com. School Dist., 33 Ky. 597, but it may insist upon com- Law Rep. 926; Fransioli vs. Thomp- pliance with the clearly expressed son, 55' Wash. 259 ; 104 P. 278 ; Hin- requirements, which are made the ton vs. iStanton, 165 S. W. 299. condition of liability. 206 Hohn vs. Shideler, 164 Ind. 2O0 Segari vs. "Mazzei, 116 La. 242; 72 N. E. 575; Schreiber vs. 1026; 41 Southern 245. See also Worm, 164 Ind. 7; 72 N. E. 852; Kunzweiler vs. Lehman, 70 N. Y. Chicago vs. Agnew, 264 111. 288. 19. 290; Fergus Falls vs. Illinois The strict rule as to release of ISurety Co., 112 Minn. 462; 128 N. surety by the acts of ':he indemnitee W. 820; Brandup vs. Brazier, applies only to voluntary sureties 111 Minn. 376; 127 K. W. 424; and not to paid sureties. Equitable Fransioli vs. Thompson, 55 Wash. Surety Co. vs. Bank of Hazen, 121 259; 104 P. 278; Prescotfc National Ark. 630; 181 S. W. 279, 1200; Bank vs. Head, 11 Ariz. 213; 90 P. Pond Creek Coal Co. vs. Citizens' 328. 107c THE LAW OF SURETYSHIP. such case mere immaterial variations, or unsubstantial devia- tions which do not prejudice the right of the surety, do not discharge it.''^*"* The weight of authority supports the view that any change in the principal contract discharges the surety, whether the risk is increased or not.^"^ If the builder's contract provides that changes may be made in the plans and specifications, the surety is held to have consented in advance to such alterations ;-"'' this assent by the surety is applied, however, only as to minor changes and do not include changes which greatly enlarge the responsibility of the contract. 20«Rule vs. Anderson, 160 Mo. App. 347; 142 S. W. 358. See also Boppart vs. Surety Co., 140 Mo. App. 675; 126 S. W. 708; Long vs. Amer- ican Surety Co., '23 X. D. 402; 137 X. W. 41; James Black Masonry & Contracting Co. vs. National Surety ■Co., 61 Wash. 471; 112 P. 517. 2oe Beers vs. Wolf, 116 Mo. 179; 22 S. W. 620 ; O'Neal vs. Kelley, 65 Ark. 550; 47 S. W. 409; Alcatraz Masonic Assn. vs. U. S. F. & G. Co., 3 Cal. App. 338; 85 P. 156; Ful- lerton Lumber Co. vs. G-ates, 89 Mo. App. 201; Bagwell vs. American Surety Co., 102 Mo. App. 707; 77 S. W. 327; Cowdery vs. Hahn, 105 Wis. 455; 81 N. W. 882; Eeissans vs. Whites, 128 Mo. App. 135; 106 S. W. 603; Luling Oil & Mfg. Co. vs. Golimert, 50 Tox. Civ. App. 606 ; 110 S: W. 772; Utterson vs. Elmore, 154 Mo. App. 646; Trustees of 7th Baptist Church vs. Andrew & Thom- as, 115 Md. 535; 81 Atl. 1; Wood- ruff vs. Sthultz, 155 Mich. 11; 118 N. W. 579; Haigler vs. Adams, 5 Ga. App. 637; 63 S. E. 715; Wolf vs. Aetna Indemnity Co., 163 Gal 997; 126 P. 470; United States vs. Freel, 18fi U. S. 309; Ziegler vis. Hallahan, 131 Fed. 210. But see Guaranty Co. vs. Pressed Brick Cb., 191 U. S. 416. In Hubbard vs. Reilly, 51 Ind. App. 19; 98 N. E. 8S6, the Court said the change in the contract would discharge the surety, even though it was beneficial to the sure- ty. 20^ Drumheller vs. American Sure- ty Co., 30 Wash. 530; 71 P. 25; Daly vs. Busk Tunnel Ry. Co., 129 Fed. 513; United States vs. Walsh, 115 Fed. 697; Hedrick vs. Bobbins, 30 Ind. App. 995; ©6 N. E. 70i4; Lumber Co. vs. National Surety Go., 124 Ta. 617: 100 X. W. 556; Mc- Lennan vs. Wellington, 48 Kas. 75'6 ; 30 P. 183; Hayden vs. Cook, 34 Neb. 670; 52 X. W. 565; Lumber Co. vs. Gillard, 136 Cal. 55; 68 P. 576; Enterprise Hotel Co. vs. Book, 48 Greg. 58 ; 86 P. 333 ; Blauvelt .vs. Kemon, 196 Pa. 128; 46' Atl. 416; SURETYSHIP DEFENSES. lOld Thus where the contract wa^ for a one-story building, and the plajis were changed to a two-story building, it was held that the surety was released.^"" Alterations made solely for the benefit of the owner and not affecting the risk of the surety may generally be made without the consent of the surety.^"* If on default of the contractor the owner takes over the work and completes it, the surety can not be held for the cost of completion in a case where the owner makes a substantially different contract for the completion.'^''* Changes made in the principal contract will not release the surety from liability to materialmen and labor where the bond is given for their benefit, even though the changes are of such a character as to release the surety as against the owner. ^"^ Phila. vs. Stewart, 201 Pa. 526; 51 Atl. 348; Cowl«s vs. U. S. F. & G. Co., 32 Wash. 120; 72 P. 1032; Kretachmar vs. BruaB, 108 Wis. 396; 84 N. W. 426; American Surety Oo. vs. San Antonio Trust Oo., 98 S. W. 387; Fidelity & Deposit Oo. vs. Robertson, 136 Ala. 379; 34 Southern 933; McMuUen vs. United States, 222 U. S. 460; American Surety Oo. vs. Skwtt, 18 Okl. 264; 90 P. 7; Bartlett & Kling vs. 111. Surety Co., 142 Iowa 538; 119 N. W. 729. sop Miller-Jones Furniture Co. vs. ITort Smith Ice Co., 6 Ark. 287; 50 S. W. 508. See also Barrett-Hicks Co. vs. Glas, 9 Cal. App. 491; 99 P. 856; Swasey vs. Doyle, 88 Mo. App. 536; Bums vs. Fidelity & De- posit Co., 96 Mo. App. 467; 70 S. W. 518; MoCbnnell vs. Poor, 113 la. 133; 84 N. W. 968; Erfurth vs. Stevenson, 71 Ark. 199; 72 S. W. 49; House vs. Surety Co., 21 Tex. Civ. App. 590; 54 S. W. 303. 20ft American Surety Cto. vs. San Antonio Trust Co., 98 S. W. 387. 2o»U. S. F. & G. Co. vs. United States, 194 Fed. 611. 20; United States ex rel. Anniston Pipe & Fdy. Co. vs. National Surety Co., 92 Fed. 549. Ill the case last cited the Court said: "The bond from a contractor for public work is intended to per- form a double function; first, to se- cure to the Government the faithful "performance of the contract, and second, to protect third persons from whom the contractor may obtain labor or materials in the prosecu- tion of work. In its second aspect the bond, by virtue of the statute, contains a separate and distinct agreement between the obligors and such third persons as to which the agency of the Government ceases when the bond is given a:jd approved and subsequent changes in the con- tract or speoifieations agreed upon between the govemuTiemt and the 107e THE LAW OP SURETYSHIP. §76b. Building' contracts— changes in the manner of payment. The stipulations in a building contract, that the owner will make payments as the work progresses, in accordance with certificates of the architect, but will retain a certain percentage of the amount earned, until the work is completed", are by the weight of authority considered to be covenants for the benefit of the surety, and a violation of these stipulations by premature payments deemed a material alteration of the contract, whereby the surety is released. "The rule rests upon two reasons — the one is that such a defense deprives the surety of the security which the owner or principal contractor has agreed to hold for his benefit, and the loss of the inducement which otherwise would have operated on the contractor's mind, to induce him to finish the work in accordance with the terms of his obligation. ' ' ^'"' It has been held, however, that the condition in respect to premature payments is for the benefit of the owner only and contractor, thougli without the knowledge or consent of a surety, where the general nature of ' the work and materials remains the same, will not release the surety from liability to persons who supply labor or materials thereunder." Chaffee vs. U. S. F. & G. Co., 128' Fed. 918; Dewey vs. State, 91 Ind. 173; Conn vs. State, 125 Ind. 514; 25 N. E. 443 ; United States ex rel Snyder vs. Hazard, 53 App. Div 410; Kaufman vs. 'COoper, 46 Neb 644; 65 N. W. 796; King vs. Mur phy, 49 Neb. 670'; 68 N. W. 1029 Lumber Co. vs. Peterson, 124 la, 560; 100 N. W. 550; U. S. F. & G Co. vs Omaha Building & Construe tion Co., 116 Fed. 145; U. S. F. & G. Co. vs. American Blower Co., 41 Ind. App. 620; 84 N. E. 55S. snfc.Tas. Black Masonry & Con- struction Co. vs. National Surety Co., 61 Wash. 471; 112 P. 517 County of Glenn vs. Jones, 146 Cal 518 ; 80 P. em ; First National Bank vs. Fidelity & Deposit Co., 145 Ala. 335; 40 Southern 41.5; Calvert vs. London Dock Co., 2 Keen (Eng. Chane.) 639; Fidelity* Deposit Co. vs. Agnew, 152 Fed. 955; O'Neill vs Title Guaranty & Trust Co., 191 Fed. 570; Long vs. American Surety Co., 23 N. D. 492; 137 N. W. 41; McKnight vs. Lange Mfg. Co., l.>5 S. W. 977 ; Kunz vs. Boll, 140 Wis. 69; 121 N. W. 601; Village of Ches- ter vs. Leonard, 68 Conn. 495; 37 Atl. ,307; Queal & Co. vs. Stradley, 117 la. 748; 90 N. W. 568; McNally vs. Mercantile Trust Co., 204 Pa. 596; 54 Atl. 360. SURETYSHIP DEFENSES. 107/ tliat the condition may be waived by the owner without releas- ing the surety.-"' In other eases it is held that the surety is discharged merely to the extent that he has been prejudiced by the change in the manner of payment.^""" "Where the building contract provided that bills for labor and materials should be paid directly to the persons holding the claims, and the owner paid the contractor, it was held that the surety was discharged.-"" Where the form of certificate to be used by the architect is not fixed by the contract, a statement to the effect that a certain sum is now due will justify payment by the owner.^"" A loan by the owner to the contractor, with an agreement that the owner might apply toward the payment of the loan the sums thereafter to become due under the contract is held to be an independent transaction, and not a payment, and so not in violation of the terms of the building contract as to time of payment, and therefore not release the surety.""'' 2"' Fidelity & Deposit Co. vs. Rob- But see Gleim vs. Jones, 146 Cal. ertson, 136 Ala. 379; 34 Southern 518; 80 P. 696; Monro vs. National 933; First Presbyterian Church vs. SHirety Oo., 4T Wash. 488; 92 P. Housel, 115 111. App. 230; Eureka 290; Marree vs. Ingle, 69 Ark. 126; Stone Co. vs. First Christian Church, 61 S. W. 369. 86 Ark. 212; 110' S. W. 104'2; City aoraQuthrie vs. Carpenter, 162 Ind. of New Haven vs. National Steam 417; 70 N. E. 486; Tinsley vs. Kcra- Eeonomizer, 79 Conn. 482; 65 Atl: ery. 111 Mo. App. 87; 84 S. W. 993. 9«); McKenzie vs. Barrett, 43 Tex. 2oo|Snaith vs. Smith, 27 N. Y. S. Civ. App. 451; 98 S. W. 229. 379; WyckoflF vs. Meyers, 44 N. Y. But see First National Bank vs. 143; Finney vs. Condon, 86 111. 80; Fidelity & Deposit Co., 145 Ala. Lumber Co. vs. Peterson, 124 la. 335; 40 Southern 415. 59\3i; 100 N. W. 550. aom Smith vs. Jlolieson, 148 N. Y. ^"P Museum of Fine Arts vs. 241; 42 N. E. 6iSi9; Hand Mfg. Co. American Bonding Co., 211 Mass. vs. Marks, 36 Oreg. 323; 50 P. 549; 124; St. John's College vs. Aetna Wehrung vs. Denham, 42 Oreg. 386 ; Indemnity -Co., 201 ■ N. Y. 335 ; 94 71 P. 133; Leghorn vs. Nydell, 39 N. E. 904; Bateman Bros. vs. Mapel, Wash. 17; 80 P. 833; Mayes vs. 145 Cal. 241; 78 P. 734; Fidelity Lane, Il6 Ky. 366; 76 S. W. 309; & Deposit Co. vs. Agnew, 152 Fed. Bateman Bros. vs. Ma^l, 145 Cal. 955. 241; 78 P. 734. 108 THE LAW OP SURETYSHIP. » §77. Variation in amount of advancements tinder limited guaxsMtj — Effect upon guarantor. Where a valid contract subsists obligating the creditor to make advances to a definite amount any alteration of this con- tract reducing or enlarging the amount to be advanced will dis- charge the guarantor.^' This is a distinct substitution of a new contract; further- more, an increase or a decrease of the stipulated amount might be a detriment to the principal, and unless the promisor assents to this change he ought not to be bound. Some confusion arises by failing to distinguish between cases where the subject of the guaranty is a subsisting and binding contract between the principal and creditor to make certain advances, and when the transaction is merely a pro- posal to guarantee optional advances up to a certain amount. In the latter case the guarantor will be liable for such ad- vances as are made relying upon his guaranty whether the amount be equal to or less than the sum named in the letter of credit, and his liability within the limit named will be un- affected by the fact that the creditor may have advanced a greater sum."^ The mere failure of the parties to perform the contract, such as a refusal by the principal to receive all the advancements agreed upon, will not amount to an alteration of the contract. Thus, where the guaranty was for £400 upon condition that credit should be extended for that amount. The principal bought goods only to the extent of £300. The guarantor when 21 Eyan vs. Shawneetown, 14 111. But see Bank of New Zealand vs. 20; Watrissvs. Pierce, 32 N. H. 560. Wilson, 5 N. Z. L. R. S. C. 215, In Johnston vs. May, 76 Ind. 293, where the advancements were in ex- tihe amount due on a promissory cess of the limit of the guaranty, note was changed by the endorse- held not to invalidate the guaranty, ment of a credit due in another 2= Clagett vs. Salmon, 5 Gill & transaction; this was held to be a Johns. (Md. ) 314; Sheppard vs. material alteration and that the Daniel Miller Oo., 7 Ga. App. 760; surety was discharged. 68 S. E. 451. ' SURETY DEFENSES. 109 sued claimed his discharge on the ground that credit had not been extended to the ajnount stipulated. This was held, how- ever, not to be an alteration of the contract, and that a failure to perform the contract by the principal should not prejudice the creditor."' Restrictive conditions in the contract of guaranty must oe complied with or the guarantor will be discharged. When the guaranty is upon condition that the creditor make advance- ments not exceeding a certain amount, credit in excess of this amount will whoUy discharge the guarantor."* §78. Changfe of parties. If the contractual relation of principal and creditor are changed by the substitution of new parties in place of those originally contracting, either by the original party assigning his interest in the contract to another in whole or in part, or by associating new parties by partnership agreements, the surety or guarantor will be discharged. Thus, A contracts to seU merchandise to B and C guarantees the payment. If A as- signs his contract to another the guarantor will not be liable to the assignee for the purchaser's default, neither will the guarantor be liable for the default of one to whom B should as- sign his contract of purchase. In both cases the guarantor is 23 Lindsay vs. Parkinson, 5 Irish itor failed to keep the property in- Law Eep. 124. sured which was suibject to the con- A breach of the contract by the tract. The sureity was held wholly creditor will discharge the surety; discharged and not merely to the while this is not strictly an altera- extent of his loss by reason of the tion of the contract, yet the effect omission to insure, upon the surety is the same, and if See also Pioneer Co. vs. Freeburg, the beneficiary of the suretyship fail 59 Minn. 230; 61 N. W. 25; Carson to keep his engagement he should be Assn. vs. Miller, 16 Nev. 327. estopped from charging the surety 2 1 Bloomington Min. Co. vs. with default. Searles, 63 N. J. L. 47; 42 Atl. 840; Watts vs. Shuttleworth, 5 Hurl. Kimball vs. Baker, 62 Wis. 526; 22 & Nor. 23'5. In this case, the cred- iT W. 730. 110 THE XAW OF SUEETYSHIP. dischaiged for the same reason, namely, because there is an alteration of the principal contract by the substitution of new names. In neither case has the guarantor agreed to assume suretyship relations with these new parties. The rule that a special suretyship contract can not be assigned rests upon the proposition that such assignment would be a material altera- tion, ^° and the same reason will discharge the surety where the contractual position of the parties to the main contract is changed by the formation or dissolution of partnership rela- tions on the part of either party to the contract.^'' §79, Alterations beneficial to the surety or guarantor. The claim is frequently urged that the general rule wbereby the promisor is discharged by the alteration of the main con- tract without his assent, should yield in those cases where the changes are beneficial to the surety or guarantor. That to in- sist upon its application in such cases is a mere technicality without any equity in its favor and not within the spirit of the adjudicated rules in suretyship. ^^ 25 Ante Sec. 52. The rule stated vs. Lloyd's Admrs., 18 O. S. 353; in the text can not apply where the Manufacturers' Bank vs. Cole, 39 surety^ip is upon a. negotiable in- Mo. 188. strument executed in anticipation of See also Greeniville vs. Ormand, .51 advancements by a particular cred- S. C. 58; 28 S. E. 50. In this case itor. Such creditor may assign his the original payee declined to dis- contract interest in the note, and count the note and indorsed it to tae surety or guarantor upon the another without recourse. Theeure- paper will be liable to the substi- ty was held to be discharged, tuted party for the adivancements. Bycrs vs. Hickman Grain Co., 112 Lyman vs. Sherwood, 20 Vt. 42; Iowa 451; 84 N. W. 50O; Mathews Cross vs. Rowe, 22 N. H. 77. vs. Carman, 110 Mich. 569; 68 N. A promisor in suretyship, how- W. 243 ; Friendly vs. National Sure- ever, has the undoubted right to se- ty Co., 8i9 P. 177; 46 Wash. 71; lect his own creditor, and to insist School Dist. Ko. 6 vs. Smith, 127 that there be no change of creddtors P. 707 ; 63 Or. 586. without his assent in all cases except But see The Springfield Light Co. where the rules of negotiability pro- vs. Hobart, 98 Mo. App. 227; 6'8 tect parties who make advances in S. W. 942. good faith. Notice to the party mak- 26 Ante Sees. 53, 54. ing advances that he is not the one 27 Cambridge Savings Bank vs. to whom the surety expected to be Hyde, 131 Mass. 77. bound will prevent recovery against Morton, J.: "The surety* is the surety. Russell vs. Ballard. 16 discharged because the act of B. Mon. (Ky.) 201; Prescott vs. the creditor is injurious to him Brinsley, 6 Cush. 233 ; Clinton Bank and is inconsistent with the duty vs. Ayres, 16 0.283; Knox lOo. Bank which the creditor owes to him. SUEETYSHIP DEFEasrSES. Ill This -view has been generally rejected upon the ground that a surety should not be compelled to adopt contracts merely because they can be shown to be beneficial to him, and upon the ground of public policy which requires that the integrity of written instruments be preserved, and that the one for whose benefit such instruments are intended, and who has the cus- tody of them, must be charged in strictness with their preserva- tion.^* Where the act of which the surety complains is a new agreement changing some of the terms of the original' agreement, we think the true rule is, that, if such new agree- ment is or may be injurious to the surety, or if it amounts to a substi- tution of the new agreement for the old, so as to discharge and put an end to the latter, the surety is dis- charged. But if the change in the original contract from its nature is beneficial to the surety, or if it is self-evident that it cannot prejudice him, the surety is not discharged." In this case, the rate of interest was reduced from 7% to 6% per cent, by a stipulation written on the back of the note. Some distinction seems to be made in this case and others between alterations in the language of the original contract, and the agreements to cihange which are disconnected from the original contract, leaving the language of the latter intact. Wilkinson vs. McKimmie, .36 App. D. C. 336; Ganey vs. Hohlman, 145 111. App. 467; 'New York Life Ins. Co. vs. Casey, 178 N. Y. 381, 391; 70 N. E. 916, 919. iSee also Ullmian Realty Co. vs. Holander, 123 N. Y. S. 772. The court said: "While it is un- questionably the law in this state, wihere a contract is altered or changed, that the surety is dis- charged, amd ihatthe courts will not make inquiry to ascertain if the change be to his benefit or his in- jury, still I am of the opinion that the doctrine as laid down in the Massachusetts case ( Cambridge Sav- ings Bank vs. Hyde, supra), is the logical, rational and proper one, and sbould be applied in this state to cases where, if T^ithout inquiry it is self-evident and upon a mere state- ment of the faot, that" benefit must necessarily and without question, re- sult to the guarantor, that he is not released or discharged from his obligation. Law is common sense, and if one guarantee the terms and provisions of u, lease of anotlier a* $0,000 a j'ear for five years, and voluntarily or by agreement the rent is reduced to $2,000 a year, without any further covenants or conditions in any respect changing the remaining provisions of the lease, \\ould it not be unreasonable, and 1 may say almost irrational, to hold that the surety is discharged because he is necessarilj' benefited bj' a release of a contingent liability to the extent of $15,000 for the full term? I am of the opinion, and I so decide this case, that where an agreement is altered or changed, and the change is made without the knowledge or consent of the surety or guarantor, but where it appears and it is self-evident, without the necessity of any inquiry, that the alteration cannot be otherwise than beneficial to the surety, he ig not discharged from liability." See also Dodd vs. Vucovich et al., 38 Mont. 188 ; fl'9 Pac. 296. 28 Calvert vs. The London Dock Co., 2 Keen -eSS. "The argument, however, that tlje advances beyond the stipulations of the contract, were calculated to be benficial to the sureties, can be of no avail. In almost every case where the surety has been released, either in conse- quence of time being given to the principal debtor, or of a compro- mise being made with him, it has been contended, that what was done was beneficial to the surety — and the -answer has always been, that the surety himself was the proper judge of that — and that no arrangement, different from that contained in his contract, is to be forced upon him." See also Polak vs. Everett, 1 Q. B. Diy. 676, Mellor, J. : "The surety is entitled not to be affected Iby any- 112 THE LAW OP SURETYSHIP. The customary clause in building contracts reserving a per- centage of the contract price to be paid when the work is com- pleted is a stipulation which can not be waived without dis- charging the surety, and it is no answer to this defense that such advancements in excess of the requirements of the eon- tract were beneficial to the principal, by enabling him to pro- ceed with the work, and so beneficial to the surety."" In cases where the contract of the surety incorporated by reference the main contract, or where it is shown the surety contracts with knowledge of the terms of the main contract, thing done by the creditor, who has no right to consider w'hether it might be to the advantage of the surety or not. The surety is en- titled to remain in the position in which he was at the time when the contract was entered into." A slight modification of this ap- pears in Holme vs. Brunskill, 3' Q. B. Div. 4D5, in which the holding is that where it is self-evident without inquiry, that the change is benefi- cial to the surety, that the surety will not be discharged, but that if any evidence is necessary to estab- liah whether or not the change is prejudicial to the surety, the change will be deemed material and the surety discharged. In this case the contract was a leasehold upon wtich defendant was surety. The parties to' the lease modified it by the tenant giving up a small part of the land in consid- eration of a reduction of a corre- sponding part in the rent. The fact as to whether this was prejudicial to the surety was in the lower court left to the jury and they found it was not. The leaving of this question to the jury was held in the Court of Appeals to be error. A dissenting opinion holds, "Where the surety makes himself responsible in general terms for the observance of certain relations be- tween parties in a certain contract between two parties, he is not re- leased by an immaterial alteration in that relation or contract. "My opinion is in accordance with the finding of the jury, and it will be most dangerous in this particular case to put ourselves in the place of a jury and because we think seven acres may make a difference, or f 10 a year may make a difference, to set aside the finding of the jury, which is that neither one is material or substantial. I think the surety is not released. The doctrine of the release of suretyship is carried far enough, and to the verge of sense, and I shall not be one to carry it any further." See also Reese vs. Unitel States, 9 Wall. 13, Field, J. (p. 21) : "Any change in the contract, on which they are sureties, made by the prin- cipal parties to it without their as- sent, discharges them, and for ob- vious reasons. When the change is made they are not bound by the con- tract in its original form, for that has ceased to exist. They are not bound by the contract in its altered form, for to that they have never assented. Nor does it matter how trivial the change, or even that it may be of advantage of the sureties. They have a right to stand upon the very terms of their undertaking." See also John A. Tolman 'Oo. vs. Hunter, 113 Mo. App. 671'; S8 S. W. 636. Martin vs. Thomas, 24 How. (U. S.) 315; Chester vs. Leonard, 68 Conn. 49i}; 37 Atl. 397; Simonson vs. Grant, 36 Minn. 439; 31 N. W. 861; Evan vs. Morton, 6S Tex. 259; Post Adm. vs. Losey, 111 Ind. 74; 12 N. E. 121; Snodgrass vs. Shader, 168 S. W. 567; Zeigler vs. Halla- han, 13 1 Fed. 20i5 ; 66 C C. A. 1 ; Antisdel vs. Williamson, 165 N. Y. 372; 59 N. E. 207; Weiss vs. Leich- ter, 113 N. Y. S. 99«; Utterson vs. Elmore, 136 S. W. 9; 164 Mo. App. 646; Hubbard vs. Eeilly, 9» N". E. 886 ; 51 Ind. App. 19 ; Bauschard Co. vs. Fidelity & Casualty lOo., 21 Pa. Sup. Ct. Rep. 370. 29 Evans vs. Graden, 125 Mo. 72; 28 S. W. 439; Bragg vs. Shain, 49 Cal. 131: Board of Com'rs vs. Bran- ham, '57 F«)d. Rep. 179. SURETYSHIP DEFENSES. 113 some courts hold that this affords a special reason for the rule that the surety is discharged by any material alteration whether beneficial to him or not. But that if such reference is not made or such knowledge of the main contract is not shown, the surety will not be discharged by alterations not injurious to him.^° §80. Alterations enlarging the principal liability. Changes in the relations between the principal and creditor resulting in larger responsibilities upon the principal will dis- charge the surety or guarantor. Thus a Surety upon the bond of a bank cashier was held to be discharged by an increase of the capital stock of the Bank from $300,000 to $750,000. This increase of capital involv- ing increase of responsibility was considered a material in- crease of risk for the Surety.'^ A change in the business of the creditor which places new duties upon its agent will discharge the Surety of the agent, although the latter continues nominally in the same employ- ment.'^ A private banking company is merged by incorporation into an Insurance & Trust Co. This was held to discharge the so Sanderson vs. Aston, L. R., has become surety has taken care 8Exckci.73, Kelly, C. B.: "The au- that the original agreement should thorities cited go to show that we be made part of his contract. But are to look at the terms of the in the cases cited to us, when the surety's engagement; not at the original contract was not made part terms of any agreement between the of the surety's contract, but the employer and employed, unless these Court has nevertheless said that the terms are made part of the surety's surety was discharged, there has agreement And if it clearly been some material alteration in appeared that the surety had en- the terms of the original agreement, tered into the agreement on the faith in the sense that the surety has been of the original contract, that is, if injured or put in a worse position notice had been given to him of the by the change." terms of the contract, and he had, si Grocers' Bank vs. Kingman, 16 after that notice, entered into this Crray 473. See also Chandler Lum- bond, he would undoubtedly have "^er Co. vs. Radke, 156 Wis. 495; been discharged by the alteration." US N. W. 1&5. Pollock, B. (referring to Whitch- 8/mo'''U^'''"''''^'' "'' '^""^"'' er vs. Hall, cited Ante Sec. 73): 32 Blair vs. Insurance Co., 10 Mo. ■'That case (which was no doubt a 5^0. very strong decision) has been act- In, this case the Life Ins. Co. en- ed on ever since, when the party who gaged in banking and this was held to discharge the Surety of the agent. 114 THE LAW OP SUEETYSHIP. sureties upon the bond given the Banking Co. from all liabili- ties for defalcation committed after the incorporation.^' §81. Discharge of promisor by extension of time. The defense of " giving time " to the principal is founded upon the fact that any change in the time when the contract is to be performed is a material alteration of the main con- tract. It has been said that all other terms of the contract remaining the same, the mutual consent of the original parties that the payment or performauce may be defeired, is not a substitution of a new contract/^ but this is merely another form of statement that a mere acquiescence in a delay in per- formance is not an extension of time within the meaning of the rule. A contract or agreement between the original parties to extend the time of performance is clearly such an alteration of the main contract as will discharge the Surety or Guarantor, if such e'Xtension is without his consent. '° 33 Bensinger vs. Wren, 100 Pa. 500. 3- Benjamin vs. Hillard, 23 How. 165. 35 Ide vs. Churchill, 14 O. S. 383. Ranney, J. : " The obligation of the surety can only be created in writing, and no equitable extension of its terms, by construction or oth- erwise, is allowed. Every contract is composed of the material terms and stipulatioiis embraced in it, and, among these, none is more important than the time of performance. It follows, from the principles already stated, that whatever changes any of these material terms and stipula- tions, so as to destroy the identity of the obligation to which the Sure- ty acceded, necessarily discharges him from liability. An engagement to pay money in six months, is not the sam„e as one to pay it in twelve months; and if the creditor, by a valid agreement with the debtor, ex- tends the time of performance from the shorter to the longer period, he supersedes the old obligation by the new, and cannot enforce payment until the longer period has elapsed. If the Surety is sued upon the old agreement to which alone his under- taking was accessory, he has only to show that that has ceased to exist, and no longer binds his prin- cipal; 'and if he is sued upon the substituted agreement, he is entitled, both at law and in equity, to make a short and conclusive answer non haec in foedera vini. But such an agreement between the principal parties, is perfectly valid and legal; and until some method can be de- vised for depriving the principal of the benefits of a valid agreement, or of binding the surety to an agree- ment to which he never acceded (a work hitherto thought not to be within the powers of either Courts or Legislatures) the discharge of the latter must ensue." Thomas vs. Stetson. 59 Me. 229; SDEETYSIIIP DEFENSES. 115 Moreover, extension of time to the principal, is more than a mere alteration. It is in many eases an increase of risk, and in all eases the Surety or Guarantor is deprived of the right to pay the debt at maturity, and of immediate subrogation to the rights of tbe creditor against the principal. This right to subrogation is an equity inherent in all contracts of surety- ship. The discharge of the promisor is not, however, de- pendent on showing injury to the promisor. It is the agree- ment to extend which releases the promisor, and the discharge is from the time of that agreement. The subsequent incon- venience or damage of the promisor does not entei" into the ques- tion of the release, since the release has already been accom- plished.'' §82. Agfreement for extension must be for a consideration. An agreement for extension vwll not be binding or valid un- less based upon a consideration. It will not amount to a sub- stitution of a new contract unless the parties have placed them- selves so that they are^ no longer bound by the terms of the original contract as to the time of performance. A mere pas- sive delay or acquiescence in the default of the principal or even mutual assent to a continuation of the default, is not " giving time " within the meaning of the rule, for such an understanding of the parties, unless it take the form of a contract supported by a consideration, may be disregarded by either party. The original agreement subsist" and remains in full force, notwithstanding the parties to it ^ee fit not to insist upon ita . performance or even consent to its non-performance. There Henderson vs. Ardery, 36 Pa. 44'9 Meggett vs. Baum, 57 Miss. 22 Dodgson vs. Henderson, 113 111. 3'60 App. l.?0; Antisdel vs. Williamson, 165 K. Y. 372, 59 N. Y. 207. 30 Bowmaker vs. Moore, 7 Price Price vs. Dime Savings Bank, 124 223 ; Samuell vs. Horvrarth, 3 Meriv. 111. 317; 15 N. E. 7.54; Mobile & 372; Eees vs. Berrdngton, 2 Ves. Montgomery Ey. vs. Brewer, 76 Ala. 540 ; Tuoihy vs. Woods, 122 Oal. 135; Yeary vs. Smith, 4.3 Tex. 56; 6©o; 55 Pac. 683; Eevell vs. Thrasili, E^lberts vs. Eichardson, 3S Iowa 132 N. C. 803; 44 S. E. 596. 290 ; Todd vs. Greenwood School Contra — ^Holding compensated cor- Dist., 40 Mich. 294; Edwards vs. porate surety, not discharged where Ooleman, 6 T. B. Mon. (Ky.) 567; it does not appear that the exten- Insurance Co. vs. Hanck, 83 Mo. sion of time was unreasonable or 21 ; Deal vs. Cochran, 66 N. C. 26'9 ; that the surety was prejudiced Fanning vs. Murphy, 126 Wis. 538 ; thereby. U. S. F. & G. Co. vs. 105 N. W. 1056; Diehl vs. Davis, United States, 1'78 Fed. ©92- 102 88 P. 532; 75 Kans. 38; Wright vs. C. C. A. 192; Guaranty Co. vs. Deaver, 114 S. W. 165; 52 Tex. Civ. Tressed Brick Co., 191 U. S. 416; 116 THE LAW OF SURETYSHIP. having been no consideration to support the extension, tho creditor is not precluded from pursuing his remedy against the principal and the promisor under these circumstances cannot claim his discharge.^' The payment by the principal of obligations already due will not amount to a consideration for an extension ; if at the ma/- turity of the debt the principal agrees to pay part of the amount due, providing the creditor will extend the time for the balance, the extension, although agreed to, will not be bind- ing on the creditor, even though the debtor pays the amount stipulated, since his agreement to pay a part of the sum due creates no new obligation, as he is already bound to pay this amount at this time.^^ Where the agreement for extension has been set aside by the creditor on the ground of fraud by the principal the surety will not be discharged since there never was a binding agreement for the extension.^*" The surety is not discharged where an attorney to whom a note had been sent for collection gives the debtor an extension of time, since it is beyond the scope of his authority and therefore not binding on the creditor/''"' An agreement to extend in consideration of a payment on the debt before it is due will be binding, even though the time till maturity is only one day.^^ Philadelphia vs. Fidelity & Deposit ( Me. ) ; Atlantic Trust Co. vs. Union Co., 231 Pa. 208; 80 Atl. 62. Trust Co., 110 Va. 28«; 67 S. E. 37 Boardman vs. Larrabee, 51 182. Conn. 39; Tabin Canning- Co. vs. ss Halliday vs. Hart, 30 X, Y. Fi-aser, 81 Tex. 407; 17 S. W. 25; 474; Parmelee va. Thompson, 4.i N. Lowman vs. Yates, 37 J>f. Y. 601; Y. 58; Solary vs. Stultz, 22 Fla, Olmstead vs. Latimer, 158 N. Y. 263; Jenkins vs. Clarkson, 7 0. 72; 31'3; 53 N. E. 5; First Nat. Bank vs. Turnbull vs. Brock, 31 0. S. 649; Iiineberger, 8'6 N. C. 454; Zane vs. Sully vs. Childress, 106 Tenn. 109; Kennedy, 73 Pa. 182; Shaffstall vs. 60 S. W. 499; Schwartz vs. Smith McDaniel, 152 Pa. 598; 25 Atl. 576; 128 N. Y. S. 1; Stroud vs. Thomas, Goodwyn vs. Hightower, 30 Ga. 249; 139 Cal. 274; 72 Pac. 1008. Sullivan vs. Hugely, 48 Ga. 486; ssaRed River National Bank vs. Roberta vs. Stewart, 31 Misc. 664; Bray, 148 S. W. 290; 105 Tex. 312. Ford vs. Beard, 31 Mo. 459; Fair vs. ssi Hall vs. Prcsnell, 72 S. E. 985; Pengelly, 34 Up. Can. (Q. B.) 611; 157 N. C. 290. Robinson vs. Dale, 38 Wis. 330 ; ^° Uhler vs. Applegate, 26 Pa. 140. Hayes vs. Wells, 34 Md. 512 ; Berry ^"* ^^ Weaver vs. Prebster, 37 vs. Pullen, 69 Me. 103; John M. l!"^- ^PP" ff^i," N E. 674, where Parker & Co., vs. Gmllot, 118 La. '* '^^„''^'^ *^^^ ^^f Payment on ooo. Aft a„ Ttwi T^ 1 oj. r\ June IS, oi one year s mterest due ^- .^"f-' ;^' \ c^. ,"• "" ■T""^ ^6, does not constitute a vs. First Christian Church, 86 Ark. consideration for a contract to ex- 212; 110 S. W. 1042; Almon H. tend the time of payment of such Fogg Co. vs. Bartlett, 7'5 Atl. 380 note from June 26. SURETYSHIP DEFENSES. 117 §83. Payment of advance interest as a consideration for ex- tension. The payment in advance of the legal rate of interest fur- nishes an adequate consideration for an agreement to extend the time of payment of the principal obligation. If the debtor does not pay at maturity the law imposes upon him an obliga- tion to pay interest on the debt so long as he retains the money, but there is no obligation to pay such interest in advance. The receipt of the creditor of advance interest imports a consid- eration and will malie valid and binding his promise to extend the time of payment.*" It has been held that an agreement to extend payment on a note is binding upon the parties, so as to discharge the non-con- senting sureties, if the debtor promises to pay the regular legal rate of interest for a specified time, and that it is not neces- sary that such interest be paid in advance in order to create a consideration.*' 1" People's Bank vs. Pearsons, 30 Bt. 711; Maher vs. Lanfrom., 8'6 111. 513; Kaler vs. Hise, 79 Ind. 301; Merchants Ins. Co. vs. Hauck, 83 Mo. 21 ; Limelock Bank vs. Mal- lett, 34 Me. 547 ; Rose vs. Williams, 5 Kan. 483 ; Wyatt vs. Dufreue, 106 111. App. 314; Red River Nat. Bank vs. Bray, 13i2 S. W. 968; Bedford vs. Kelley, 1'39 N. W. 250; 173 Mich. 492. The payment of usurious interest in advance is a, good consideration for extension. Wild vs. Howe, 74 Mo. 5511; Osborn vs. Low, 40 0. S. 347; Myers vs. Bank, 78 111. 257; Lemmon vs. Whitman, 75 Ind. 318 ; Flemming vs. Barden, 126 N. 0. 450; 36 S. E. 17; Glenn vs. Morgan, 23 W. Va. 467; Nilblack vs. Cham- peny, 10 S. D. 165; 72 N. W. 402; Froude vs. Bishop, 49- N. Y. S. 955. Contra — Farmer's and Trader's Bank vs. Harrison, 57 Mo. 503. The payment of usurious interest fails as a consideration in Missis- sippi, where the penalty of usury ia the forfeiture of the entire interest. Polkinghorne vs. Hendricks, 61 Miss. 366. In those states where the payment of usurious interest is considered as a part payment on the debt, the agreement to give time is not sup- ported by any consideration and the surety is not discharged. Nightin- gale vs. Meginnis, 34 N. J. L. 461 ; >Iartman vs. Danner, 74 Pa. 36; Cornwell vs. Holly, 5 Rich. 47; Jen- ness vs. Cutler, 12 Kan. 500. 41 McComb vs. Kittridge, 14 0. 351, Read, J. ; "It is just as compe- tent for the principals to a note to extend the time of payment for a specified period, as it was to fix the time of payment originally. If the lender of money, secured by a note, after the same becomes due, con- tracts with the borrower that the time for paying the same shall be extended for one year, or for any other period, upon consideration that the borrower sihall pay the legal Or less rate of interest, why is not that a binding contract? The lend- er, by this contract, secures to him- self the interest on his money for the year ; and the borrower precludes himself from getting rid of the pay- ment of interest, by discharging the principal. It is a valuable rigiht to have money placed at interest, and it is a valuable right to have the privilege at any time, of getting rid of the payment of interest by dis- charging the principal. Bv this contract, the right to interest is se- cured for a given period, and the right to pay off the principal, and get rid of paying the interest, is 118 THE LjVW of suretyship. A promise by the principal debtor to pay usurious interest stands upon the same basis. The effect of such contract is to bind the party to pay at most, only the legal rate, and it may be doubted whether such promise to pay the legal rate or usurious interest, adds any new obligations to those already resting upon the debtor.*- An agreement to pay a higher rate than the legal rate and not tainted ^\ith usury, is a good consideration and will sup- port an extension.^^ The payment of interest in advance merely supplies the element of consideration and does not of itself amount to a contract to extend,^* although such payment is prima facie evidence of an agreement to extend.*^ also relinquished for sucli period. Here, then, are all the elements of a binding contract. But it is Said there is no consideraifeion for the extension of time, because the law gives six per cent, after the note is due. But the law does not 'secure the payment of this interest for any given period, or prevent the dis- charge of the principal at any mo- ment." This seems to be the entire ques- tion, for if the promise to pay in- terest is a consideration, then, for that reason, the debtor is precluded for a given period from discharging the debt; and if the promise to pay interest is not a consideration, then the debtor is not so precluded. /Ohute vs. Pattee, 37 Me. 102 ; Moore vs. Redding, 69 Miss. 841 ; 13' South. 849; Fambro vs. Keith, 122 S. W. 40. Contra — Fanning vs. Murphy, 126 Wis. 538: 105 X. W. 10'56; Dean vs. Sedan Milling Co., 19 Cal. App. 28 ; 124 Pac. 736. See also Wood vs. Newkirk, 15 0. S. 295. Here the holding was, that the promise although to pay usuri- ous interest was binding for the legal rate, and hence there was suf- ficient consideration to support an extension. Bank vs. Walter, 104 Tenn. 11; 55 S. W. 301. *2 Reynolds vs. Ward, 5 Wend. 501 ; Witmer vs. EWison, 71 111. 301 ; Meiswinkle vs. Jung, 30 Wis. 361 ; Scott vs. Hall, 6 B. Mon. (Ky.) 285. The execution of a note for the usurious interest agreed upon is a good consideration for the extension. The creditor who accepts such a note is not in a position to say that it is void and hence, as to him, the ex- tension based upon this note as a, consideratoin, is ^'alid, although the maker of such note for usurious in- terest might defend against it. Moulton vs. Poston, 52 Wis. 169; 8 N. W. 621 ; Scott vs. Saffold, 37 Ga. 384; Ck)rielle vs. Allen, 13 Iowa 289. Contra — -Kyle vs. Bostwick, 10 Ala. 589; Anderson vs. Mannon, 7 B. Mon. (Ky.) 217; Smith vs. Hyde, 36 Vt. 308. The rule however seems to be dif- ferent when no note is given and the agreement to pay usurious interest rests in parol. 'Oox vs. Mobile Co., 37 Ala. 320; Galbraith vs. Fuller- ton, 53 111. 126; Benz vs. PuUen, 69 Me. ini; Thaver vs. King, 31 Hun 437 ; Payne vs. Powell, 14 Tex. 600. OAT 04 JN. Y. 467; btuart vs. Lancaster, 48 Jindley VS. Hill, 8 Ore. 247. g^ y^ 77^; 6 S. E. 139; ChickasaW A,, " ,«r =^r\^" Jf- ^ •'. ^ Co. vs. Pitcher, 36 Iowa 593; Dixon Wis. 169; 8 N. W. 621, where it is ys. igpencer, 59 Md. 246. held that an extension till "after But see Hummelstown Brown- threshing" ' was suificiently definite stone Co. vs. Kuerr, 25 Pa. Sup. Ct. 465. 120 THE LAW OF SURETYSHIP. but is in the nature of a payment, but whether the original debt is merged in the new promise, and so extinguished, or merely postponed, is immaterial so far as its effect upon the surety, since the creditor cannot enforce his rights upon either the original or substituted agreement till the maturity of the latter. The creditor loses his rights against the sure.ty, even if he has the option to bring his action at the maturity of the new note, either upon the original or substituted contract. It has been held that the execution of a note for a past due obligation, where there is no express agreem.ent for an exten- sion, does not preclude the creditor from surrendering the note before it is due and proceeding upon the original indebted- ness.^^ It follows of course that the application of this rule prevents the discharge of the surety. The taking of the debtor's note with the expressed intention and understanding that the surety is to remain liable, will not suspend the remedy on the main contract, such note being merely collateral will not operate to release the surety.'^ If for any reason the new note is invalid the sureties on the original note are not discharged since there never was a valid extension of time granted to the debtor."^" ^6. Collateral securities maturing at a later date. A contract to extend time will not be implied from the fact that the creditor accepts from the debtor collateral securities maturing at a later date, unless such collaterals are taken as a substitution for, or in payment of, the original obligation, as distinguished from their use merely as additional security."' While such additional security implies an assent by the cred- 51 Moore vs. Fitz, 59 N. H. 572 ; guarantor is unaffected by the fact Gordon vs. Price, 10 Ired. 385 ; Mar- that the debtor gives his note ma- shall vs. Marshall, 42 Ala. 149 ; turing at the same time as the main Breitung vs. Lindauer, 37 Mioh. contract. Case vs. Howard, 41 Iowa 217 ; Poole vs. Rice, 9 W. Va. 73 ; 47« ; Robinson vs. Dale, 38 Wis. 330. Hall vs. First Nat. Bank, 5 Kan. 52onald, 32 R. I. 406: 190 Mass. 567; 77 N. E. 639. 79 Atl. 969. esd Kissire vs. Plunkett-Jerrell oo Reese vs. U. S., 9 Wall. 13 ; U. Grocery Co., 145 S. W. 567; 103 S. vs. Backland, 33 Fed. Rep. 156. SURETYSHIP DEFENSES. 128a 2. By payment in due course by the party accommodated, where the instrument is made or accepted for accommodation. 3. By the intentional cancellation thereof by the holder. 4. By any other act which will discharge a simple contract for the payment of money. 5. "When the principal debtor becomes the holder of the instrument in his own right at or after maturity. A person secondarily liable on the instrument is discharged : 1. By any act, which discharges the instrument. 2. By the intentional cancellation of his signature by the Holder. 3. By the discharge of a prior party. 4. By a valid tender of payment made by a prior party. 5. By a release of the principal debtor, unless the holder's right of recourse against the party secondarily lia,ble is ex- pressly reserved 6. By any agreement binding upon the holder to extend the time of payment, or to postpone the holder's right to enforce the instrument unless tlie right of recourse against such party is expressly reserved. Accordingly it has been held that since the code provides in what manner and for what causes such instruments may be discharged and by force of the rule expressio unius est exclusio alterius, parties upon such instruments who are primarily liable thereon cannot otherwise be relieved from responsibility for their payment. As to them the defense of extension of time is no longer availaible.*"" But a guarantor of a negotiable instrument being only secondarily liable thereon is by the express provisions of the 690 Richards vs. Market Exchange ing & Mfg. Co. vs. Heyburn, 106 Bank, 81 0. S. 348: 90 N. E. 1000; Pae. 170; ,56 Wash. 628; Wolsten- _. ,' , _, p Tv/r T, holme vs. Smith, 97 Pae. 329; 34 Vanderford vs. Farm;er9 & Mechan- ^tah 300; Cellers vs. Maeehem, 49 ics Bank, 105 Md. 164; 66 Atl. 47; Or. 186; 89 Pac. 426. Ante, iSle o irn *° °^ supported by exactly the same State vs. Blake, 2 0. S. 151. evidencefand attended by the same Ranney, J.: "The Legislature consequences, for fifteen years ; thus, has in terms limited all actions *" ^^^^ intent and purpose, nuUify- against the officer for malfea- j,"|^|*o„7.''°''' ^""'^ "^ *''^ °*'^"'' sance and nonfeasance in office to S4o Marshall vs. Hudson, 9 Yerg. one year. This is done for his pro- (Tenn. ) 57; Reeves vs. Pulliam, 7 tection against these charges, made ^^xt. (Tenn.) 119. iStee "The Stat- .fi„, li ' „ „ 11 T, J j-i, ute of Limitations in the Law of after it may well be presumed, the Suretyship" (1922), 17 Illinois Law evidence to refute them has been Review 1. 134 THE LAW OF SUKETYSHIP. If the debt has been paid in part, the promisor is discharged pro tanto.*'^ Where the debtor owes two debts, to the same creditor, one of which is secured by a surety or guarantor and the other unse- cured, and he pays generally on account, without any direc- tions as to how the payment shall be applied, and no applica- tion is made by the creditor, the law will apply the payment on the secured debt.*" The creditor may, however, make the application to the unsecured debt, if the debtor in paying does not stipulate how it shall be applied. °' It has been held that where a creditor holds collateral to secure several debts of the same debtor, some of whidi are se- S5 Solary vs. Stultz, 22 Fla. 263 ; Gould vs. Kobson, 8 East. 580. 88 Bond vs. Armstrong, 88 Ind. 65; Eddy vs. Sturgeon, 15 Mo. 199; Gard vs. Stevens, 12 Mich. 292; Webb vs. Dickenson, 11 Wend. 62; Pierce va. Knight, 31 Vt. 701; Car- son vs. Eeid, 137 Gal. 253; 70 Pac. 89 ; Exchange Bank vs. McDill, 56 S. C. 565; 35 S. E. 260; Lee vs. Man- ley, 154 N. E. 244; 70 B. E. 385; Allen, J. : "The general rule as to the application of payments is that tlie debtor has the right, in the first instance, to direct the application of a payment made to a creditor who holds a secured and an unse- cured debt, and that this right must be exercised at the time the pay- ment is made. If the debtor does not exercise this right, the creditor may apply it to either debt, or he may apply a part to one debt and the remainder to the other, and he is not' restricted to the time the payment is made. If, however, he makes the application, he cannot change it without the consent of the debtor. If neither the debtor nor the creditor makes the application, the law applies it to the unsecured debt." 87 Harding vs. Tifft, 75 N. Y. 461, Rapallo, J.: "It is contended that the right of the creditor to make the application is subject to the condition that such application be not inequitable, and such is the lan- guage used in some of the authori- ties cited. The equities referred to, however, are usually equities exist- ing between the debtor and the cred- itor, and I have found no case rec- ognizing those arising out of transactions between thp debtor and third persona, of which the creditor has no notice. The mere fact that there is a surety for one of the debts does not preclude the creditor from applying a payment thus re- ceived to the debt for which he has no security Tlie money belongs to the debtor, and where the creditor is ignorant of any duty on the part of the debtor in respect to it, he may receive and apply it as if no such duty existed. If no application had been made by either party, and the duty were cast upon the Court of making the proper application, the equities of the surety would doubtless be considered. But where the application has been made by the creditor, in accordance with his apparent legal right, and in ignor- ance of any fact which should pre- vent him from making such appli- cation, I do not think he is bound to change it on the subsequent dis- closure that a third party had an in- terest ia having it otherwise applied and that the debtor had violated a duty to such third party in not di- recting suoh applioationu .... It would create great confusion in commercial dealing, to hold that after the lapse of time, and when the position of the parties may have been clianged by such a payment, the transaction could be reopened and the creditor be obliged to revive an unsecured debt which he had treated as paid, and apply the payment on a debt for which he had ample se- curity." Hanson vs. Ecmnsavell, 74 111. 238; Mathews vs. Switzler, 46 Mo. 301; Morrison vs. Bank, 65 N. H. 253; 20 Atl. 300. SOEETYSHIP DEFENSES. 135 eured also by sureties and others not, that the creditor may apply the proceeds of the collateral first to the payment of the debts for which there are no securities.'* A refusal to accept a tender of payment by the principal will release the promisor in suretyship.'" A refusal of a ten- der made by the surety will have the same effect."" A distinction must be made, however, between a tender and a mere offer to pay. A tender is something more than a readiness to pay. It is asserting a legal right to discharge the debt by presenting to the creditor the amount in lawful money and demanding its acceptance. Merely being ready and will- ing to pay does not put upon the creditor any duty to protect the surety by accepting payment.""^ The taking of additional security will not discharge a surety or guarantor, whether such additional security consists of the addition of a new name as surety on the same instrument,"* or the deposit of new collateral, or the giving of some other form of additional indemnity."^ §97. Liability against surety or guarantor revived if payment or substituted security is void. The payment of a debt for which another is surety or guar- antor, or the substitution of a new security in place of the original suretyship contract, the latter being surrendered, ends Contra — ^Ida County Savings Bank Old Dominion Building Assn., 119 vs. Seidenstiekcr, 128 la. 54; 102 N. C. 257: 26 S. E. 40. N. VV. 821, where it was held that It is held, however, that the rule payments on an account, in the ab- stated in the text does not apply to sence of an agreement or direction the sureties upon the bond of a pub- to the contrary, will be applied to lie officer, where the principal is in the satisfaction of those items of default of the performance of his charge which are earliest in point official duty, and that a tender and of time. refusal does not convert an official S8 Wilcox vs. Fairhaven Bank, 7 trust into a mere private liability. Allen 270; Exchange Bank vs. Mc- State vs. Alden, 12 O. 59. Millan, 76 S. C. 561; 57 S. E. 630; so Ha-ves vs. Joseph, 26 Cal. 535; Cain vs. Vogt, 116 N. W. 786; 138 O'Conor vs. Braly, 112 Cal. 31; 44 la. 631. Pac. 305. But see Brown vs. First Nat. si Clark vs. Sickler, 64 N. Y. 231 ; Bank, 112 Fed. 901; Merchants Ins. Hiller vs. Howell, 74 Ga. 174; Wil- Co. vs. Herber, 68 Minn. 420; 71 son vs. McVey, 83 Ind. 108. N. W. 624 ; Crane vs. Pacific Heat ■ 92 Ante Sec. 76. & Power Co., 36 Wash. 96 ; 78 Pac. "^ Trustees of Presbyteriani Board 460. vs. Gilliford, 139 Ind. 524 ; 38 N. E. 89 Joslyn vs. Eastman, 46 Vt. 268; 404; Sigourney vs. Wetherell, 6 Met. Fisher vs. Stoekebrand, 26Ka3. 565; 553; Wadswortb vs. Allen, 8 Gratt. Curiae vs. Packard, 29 Cal. 194; 174; Citizens Bank vs. Whinery, Randol vs. Tatum, 98 Cat 390; 33 110 Iowa 390; 81 N. W. 694; Hand Pac. 433; Spurgeon vs. Smith, 11* Mfg. Co. vs. Marks, 36 Ore. 523; 52 Ind. 453; 17 N. E. 105; Smith vs. Pac. 512; 53 Pac. 1072; 59 Pac. 549. 136 THE LAW OF SURETYSHIP. the transaction so far as the suretyship promisor is concerned and exonerates him from all further liability. While this proposition is self-evident, yet it must be ob- served, that in contemplation of the lavsr, nothing amounts to payment or satisfaction which has no value, and if that which is taken in payment is not what it purports to be, or the use or retention of it by the party receiving is prohibited by law, or for any reason becomes a nullity, then the so-called payment or substitution is not a satisfaction of the original contract, and in the absence of actual or constructive waiver of these in- firn^ities in the medium of paymeut, the original contract, al- though surrendered, will be revived, and the liability of the surety or guarantor restored. One of the essential elements of a novation, or the substi- tution of a new for an old obligation, is that the new contract must be a valid one upon which the creditor may have his . remedy.®* If the principal pays the debt contrary to the provisions of the insolvency laws, so that the creditor is required to surrender the amount paid as an unlawful preference, the surety may be held, although the evidences of the indebtedness have been givn up, at the time of the payment."' If a new note is given in renewal of another, and the sig- 9* Spycher vs; Werner, 74 Wis. and it was held that the surety waa 456; 43 N. W. 161; Clark vs. Bil- not released. Pritchard vs. Hitch- lings, 50 Ind. 509'; Bristol Milling & eock, 6 Man. & G. 151 ; Swartz vs. Mfg. Co. vs. Prohasco, 64 Ind. 406'. Fourth Nat. Bank, 117 Fed. 1; 54 9s Petty vs. Cooke, L. E. 6 Q. B. C. C. A. 387; Northern Bank of C. 790. In this case the payee of Kentucky vs. Farmers Nat. Bank, a promissory, note accepted the HI Ky. 350: 63 S. W. 604; Hooker amount thereof in good faith from vs. Blount, 97 S. W. 1083; 44 Tex. the principal, and without notice Civ. App. 162. that the payment was a fraudulent It is also held that even though preference, and surrendered the note. the creditor receives the unlawful The principal afterwards entered preference with knowledge of the into a composition deed for the ben- insolvency of the principal, he may efit of his creditors. The trustee nevertheless, when compelled to sur- under the deed avoided the payment render the preference, recover from as a fraudulent preference and the the surety. Harner vs. Batdorf, 35 payee returned the amount to the 0. S. 113; Watson vs. Poague, 42 trustee, and brought suit against la. 582. the surety on the note. The surety But see Northern Bank of Ken- pleaded payment by the principal, tucky vs. Cooke, 13 Bush (Ky.) 340. SUEETTSHIP DEFENSES. 137 nature of the new note* is forged, and the creditor relying upon the new note being genuine, surrenders the old note, tke liability of the surety on the original note is not extinguished."* Also where an obligation taken in renewal is void on account of usury, the liability of the original contract is revived." If the substituted contract is void, by reason of coverture or infancy or any other disability of the party executing it, the creditor will be restored to all his rights under the original contract,"^ and the same rule applies where a new contract is void because executed without authority. °° §98. Voluntary release of security held by the creditor or upon which the creditor has a lieu. If the creditor has in his possession property of the principal as an additional security for the debt, or has acquired a lien upon the property of a principal, the creditor at once becomes charged with the duty of retaining such security, or maintain- ing such lien in the interest of the surety, and any release or impartment of this security as a primary resource for the pay- so Lovinger vs. First Nat'l Bank, demand." In this case the creditor 81 Ind. 354; Goodrich vs. Tracy, 43 brought suit on the substituted se- Vt. 314; Kineaid vs. Yates, 63 Mo. curity, which was tainted with 45; Bank vs. Buchanan, 87 Tenn. usury, the defense of usury being 32 ; 9 S. W. 202 ; Emerine vs. pleaded, he dismissed the action, and O'Brien, 36 0. S. 491; Allen vs. brought suit against the defendant, Sharpe, 37 Ind. 67; Ritter vs. Sing- who was surety. The general rule master, 73' Pa. 400; Second Nat. that if a substituted contract is void Bank vs. Wentzel, 151 Pa. 142; 24 on account of usury, the original Atl. 1087. contract is revived, may be deemed 97 Bank vs. Dauckmeyer, 70 Mo. supported by the great weight of au- App. 168; Winsted Bank vs. Webb, thority. Burnhisel vs. Firman, 22 39 N. Y. 325. Wall. 170; Swartwout vs. Payne, 19 But see La Farge vs. Herter, 9 N. Johns. 295 ; Lee vs. Peckham, 17 Y. 241, where it is held "The usu- Wis. 394. rer is not allowed to show that an ss Godfrey vs. Crisler, 121 Ind. obligation which he has taken in 203; 22 N. E. 999; M'Crillis vs. satisfaction of a prior demand, is How, 3 N. H. 348. usurious and therefore void, in or- »* Glass vs. Thompson, 9 B. Mon. der to avoid the effect of such obli- (Ky.) 237; Williams va. Gilchrist, gation as a satisfaction of a prior 11 N. H. 535. 138 THE LAW or SUBETYSHIP. meat of a debt, ■will discharge the surety to the extent of the value of the property or lien released. This is not because the parties have made any contract in respect to the additional security, but it results from the in- herent equities of a suretyship relation.^"" The creditor is under no obligation to the promisor in suretyship to acquire any lien upon property of a principal, Tinless so required by the conditions of his contract, such as a guaranty of collectibility, where such duty may sometimes be implied 5 neither is the creditor obliged to taken any steps to get into his possession any of the property of the principal,^"^ but if, in the process of collecting the debt by proceedings at law the creditor does secure a lien by execution or attachment or otherwise, or receives into his possession some of the prop- erty of the debtor as additional security, there immediately arises a trust relation between the parties, and the creditor as trustee is boimd to account to the surety for the value of the se- curity in his hands. The entire doctrine of subrogation in suretyship is depend- ent upon the immediate investment of the creditor with the obligations of a trustee whenever any rights or interests of the debtor, applicable to the debt, are placed in his control,^"^ and it is the right of the surety to be discharged if the creditor by his voluntary act deprive him of the benefit of this subrogation- It readily appears, therefore, that the reasons that underlie this rule apply with equal force, whether the lien or custody of the property is acquired at the time the suretyship contract is entered into or afterwards.^"^ 100 Henderson vs. Huey, 45 Ala. 98 Pa. 432; Templeton vs. Shakley, 275; Winston vs. Yeargin, 50 Ala. 107 Pa. 370; Day vs. Eamey, 40 0. 340; Kirkpatrick vs. Howk, 80 111. S. 446; Plankinton vs. Gorman, 93 122; Welk vs. Pugh, 92 Ind. 382; Wis. 560; 67 N. W. 1128; Pearl vs. Guild vs. Butler, 127 Mass. 386; Deacon, 24 Beav. 186; Brown Car- Cummings vs. Little, 45 Me. 183; riage Co. vs. Dowd, 155 N. C 307; Stallings vs. Bank, 59 Ga. 701; 71 S. E. 721. Bank of Monroe vs. Giflford, 79 la. loi Otis vs. Van Storch, 15 R. I. 300; 44 N. W. 558; Union Bank vs. 41; 23 Atl. 39; Friend vs. Smith Cooley, 27 La. An. 202; Taylor vs. Gin Co., 59 Ark. 86; 26 S. W. 374; Jeter, 23 Mo. 244; Brown vs. Rath- Hall vs. Hoxsey, 84 111. 616. i_ ,n /^ -iro /^i n V losposi. Chapter 10. burn, 10 Ore. 158; Clow vs. Derby, 103 Campbell vs. Rothu-ell, 47 L. SURETYSHIP DEFENSES. 139 If the suretyship contract was made upon the condition that the principal shall furnish the creditor additional security, and the security heing furnished under these conditions, is af- terwards released by the creditor, the surety is wholly dis- charged, without regard to the value of the securities released, for such a transaction amounts to an alteration of the main contract."* In such a case the surety is entitled to his discharge even though the securities released have no value, but where the rights of the surety are dependent merely upon his equity of subrogation, as distinguished from an alteration of the con- tract, the^ surety can have no relief if the securities released are without value.^"" It is incumbent upon the creditor, however, to justify his re- linquishment of securities by showing the worthlessness of the property or lien released.^"" It has been held to be a complete defense to the surety to show that the creditor has released securities of the value of the debt, even though there remains in the hands of the creditor J. C. L. 144; Pledge vs. Buss, John- 669; Watts vs. Shuttleworth, 7 son 663; Holland vs. Johnson, 51 Hurl. & Nor. 353; Foerderer vs. Ind. 346; Freaner vs. Yingling, 37 Moors, 91 F. 476; 33 C. C. A. 641. Md. 491; Willis vs. Davis, 3 Minn. los Hardwick vs. Wright, 35 Beav. 17. 133 ; Eainbow vs. Juggins, 5 Q. B. It is not necessary that the surety 'Oiv- 422; Blydenburgh vs. Bingham, have any knowledge of the addl- 38 N. Y. 371; Green vs. Blunt, 59 tional security at the time he signs, la. 79; 12 N. W. 762; Lilly vs. Eob- or at the time the security is given; ^^*'^> 58 Ga. 363. he becomes a beneficiary of the trust "° ^ioss vs. Pettingill, 3 Minn, relation, without notice of its exist- 217; Dimn vs. Parson, 40 Hun 77; ence, and can claim its benefits when- ^"^" "*'^- O'Donald, 23 Fed. Rep. ever brought to his knowledge. ^'^^• Mayhew vs. Orlckett, 2 Swanst. ^^ ^^^ creditor fails to meet this 185, Lord Eldon, G. : " Sureties are ^^^^^^ by making no proof as to the entitled to the benefit of every se- ^^^"^^ °* *^« property or lien re- curity which the creditors had ^^^^^^' ^« ''''" ^ ieemeA to have against the principal debtor, and """^^'^te'l t^^^ proeprty at its face whether the surety knows the exist- ''^^'"' ''"^ "'"'* "^'?'^ *^^ ™''*'*5' ence of those securities is imma- *° *^' '^*™*^ °* ™<='' ^^"^ ^^'"^• jgjjg^j „ Fielding vs. Waterhouse, 8 Jones & 104 Polak vs. Everett, 1 Q. B. Div. ^P*"' *^^' 140 THE LAW OF SURETYSHIP. other securities, applicable to the debt, sufficient in value to pay the debt, and to which liie surety upon recovery against him, would be subrogated, on the ground that the creditor has violated a vested right of the surety, and will not be permitted, at will, to throw upon the surety, the risk of making the balance of his securities reach far enough to cover the debt."' But the substitution of other securities of equal value,^°° or a compromise in good faith of a disputed collateral or lien,^°° will not release the sureties, for these transactions neither in- jure the surety nor change his position. §99. Belease of securities by the misconduct of the creditor. It is the duty of the creditor to exercise ordinary diligence in preserving the securities in his control which are applicable to the debt for which another is surety or guarantor. The conse- quences to the promiso-r are the same whether such securities are voluntarily released, or are lost or destroyed through the carelessness or negligence of the creditor, and the promisor has the right to require the creditor to exercise the same care in protecting this property in his interest, as a prudent man would exercise in his own interest. If the creditor leaves the property unprotected so that it is stolen or destroyed, he must answer to- the surety for its value. The use of ordinary care will, however, relieve the creditor from liability to the surety for stolen, or lost securities. ^^° Another form of negligence is where the creditor by his in- activity or lack of diligence, fails to do the things necessary to make the securities available. 107 Holt vs. Body, 18 Pa. 207. Guay, 76 N. H. 216; 81 Atl. 47.5. Contra — Saline County vs. Buie, "The holder of a promissory note is 65 Mo. 63. under no obligation to litigate the A release of an execution upon title to coillateral security at his own land upon which the judgpient is' a expense, for the benefit of a surety; lien, and which remains a lien after but if he enters upon such litigation the release of the execution, is held for the protection of all parties in- not to discharge the surety, since terested and in good 'faith makes a the security of the surety is not reasonable compromise with adverse thereby diminished. Sasscer vs. claimants, a surety who had full Young, 6 Gill & Johns. (Md.) 243; knowledge of the situation and re- Wood vs. Brown, 104 Fed. Rep. 203. fused to participate in the pro- log State Bank vs. Smith, 155 N. ceeding cannot avoid payment of the Y. 185; 49 N. E. 880; Thomas vs. note on the ground that a larger Cleveland, 33 Mo. 126; Lafayette sum should have been realized from Co. vs. Hixon, 69 Mo. 581. the security as a result of the suit." 109 Bedwell vs. Gephart, 67 la. 44; no Jenkins vs. National Bank, 58 24 S. W. 585; Berlin Nat. Bank vs. Me. 275. SUEETYSHIP UEEENSES. 141 While this may properly be denominated passive negligence, it is a breach of duty toward the promisor of the same char- acter as if the creditor had voluntarily released the securities. Thus the principal gives a mortgage upon his property, which the creditor fails to file or put upon record until after other liens have intervened/^^ or the creditor having in his hands obligations of third persons due the principal, fails to take the necessary steps to collect the same until they become worthless.^" In such cases the surety or guarantor should be discharged, to the extent of their injury caused by the negligence of the creditor, which would be the ascertained value of the property at the time the lien could have been made effective by filing, or the amount that could have been realized on the collateral, in case the creditor had acted with due diligence. The rule in this class of cases, however, cannot properly be extended to cover loss by mere delay in enforcing liens, al- though the delay renders ineffective securities that might have been applicable to the debt if an earlier action had been taken. While the promisor may be discharged if the creditor fails to file a mortgage given him by the principal, yet he is not dis- charged by the failure of the creditor to foreclose the mort- gage."' Ill Burr vs. Boyer, 2 Neb. 2£5 ; N. Y. 121 ; Griaard vs. Hinson, 50 Teaff vs. Eoss, 1 0. S. 469 ; State Ark. 229 ; 6 S. W. 906 ; Sheldon vs. Bank vs. Bartle, 114 Mo. 276; 21 Williams, 11 Xeb. 272; 9 N. W. 86; S. W. 816; Sullivan vs. State, .5« Day vs. Elmore, 4 Wis. 190; Fuller Ark. 47; 26 S. W. 194; CaEgl vs. vs. Tomlinson, 5S Iowa 111; 12 N. Butler, 2 Sim. & Stu. 457 ; Wulff vs. W. 127. See also .First National Jay77 L. E. Q. B. 756 ; Eedlon vs. Bank vs. Powell, 149 S. W. 1096. Heath, 59 Kan. 255 ; 52 Pac. 862. In this case creditor sold property Contra — ^Philbrooks vs. McEwen, to the principal, reserving title in 29 Ind. 347. himself until paid for, taking the ii^Kemmerer vs. Wilson, 31 Pa. notes of the principal with the de- 110; Fennell vs. McGowan, 58 Miss. fendant as guarantor. It was held 261; City Bank vs. Young, 43 N. H. the creditor was under no obliga- 457; Douglass vs. Eeynolds, 7 Pet. tions to protect the guarantor by 113; Grim vs. Fleming, 101 Ind. exercising his right to claim the 154 ; First National Bank vs. Kittle, property on default. 71 S. E. 109; 69 W. Va. 171. See also Meyers vs. Fa,rmers State "3 Schroeppell vs. Shaw, 3 N. Y. Bank, 53 Neb. 824. Holding that a 446 ; Howe Co. vs. Farrington, 82 failure by the creditor to seize prop- 142 THE LAW OF SUEETTSHIP, The duty of filing a mortgage results from the fact that the instrument which evidences the lien is within the sole custody and control of the creditor, with no opportunity open to the promisor to protect himself, but after the lien is created and made effective against intervening liesns by filing, the promisor has the privilege of paying the debt and becoming subrogated to the rights of the creditor, thereby being placed in a position to prosecute his own foreclosure. Again, a creditor is under no obligations to take active meas- ures of selling securities pledged for the debt, although having notice of their probable depreciation by delay,^" and having acquired a lien by judgment upon the property of the principal, the creditor may suffer the same to become dormant or expire by limitation without impairing his rights against the surety.^^" The creditor is obliged to deal with the security in his hands in good faith and with the exercise of reasonable judgment. Failure in either of these respects, if resulting injuriously to the surety, will amount to misconduct, and will release the surety. Such would be the case, where the creditor by collusion witli the debtor permits the property to be wasted. The prejudice to the surety under these circumstances does not come from mere delay, and the co-operation of the creditor in wasting tlie securities, even to a small extent, will taint the entire transac- tion, and place upon him the responsibility for the loss to the surety."' erty upon which he held a chattel the sheriff's deed so that a subse- mortgage to secure the debt, even quent mortgagee obtained a better when requested to do so by the lien. The surety was discharged to surety, will not release the surety. the extent of the loss suffered by Contra — Griffith vs. Robertson, 15 reason of plaintiff's neglect. Hun 344. iie Phares vs. Barbour, 49 111. ""Sherry vs. Miller, 7 Lea 305; 370; Nichols vs. Burch, 128 Ind. Brick vs. Freehold Nat. Bank, 37 N. 324; 27 N. E. 737; Clopton vs. J. Law, 307. Spratt, 52 Miss. 251 ; Sitgreaves vs. "5 Kindt's Appeal, 102 Pa. 441; Farmers Bank, 49 Pa. 359. Crosby vs. Woodberry, 37 Col. 1; In Robeson vs. Roberts, 20 Ind. 89 Pac. 34. 155, no levy was made under the But see Hendryx vs. Evans, 120 execution against the principal, but Iowa 310; 94 N. W. 853. By levy the property was taken out of the and sale of debtor's real estate plain- jurisdiotion of the officers holding tiff acquired security for the debt, the writ by collusion between the but he failed to procure and record principal and creditor; the creditor SUKETVSIIIP DEFENSES, 143 And 80 where the creditor sells the securities at a sacrifice, by failing to exercise good judgment in consummating the sale, or because of indifference to the rights of the surety, the dam- age resulting from such misconduct will be chargeable to the creditor/^'' §100. Release of securities by operation of law. If liens are lost by reason of the operation of law, althougli without the knowledge of the creditor, and without his co-oper- ation in any way, he must nevertheless be deemed responsible for the resulting damage to the surety. A sufficient reason for this wciuld seem to be that the surety should not suffer loss on account of the operation of rules of law which do not in any way arise as a consequence of his own acts, or as a necessary result of his contract. If the creditor institutes legal proceedings for the collection of the debt, the negligence of the officers of the law, or the errors of the courts, must be considered as the act of his own thereafter seeking to hold the sure- ty, who was discharged to the extent of the property removed. It will not, however, be consid- ered as collusive or fraudulent for the creditor to direct the return of an ejcecution without a levy, al- though the property of the principa,! is at hand upon which a levy might be laid. The creditor's duty is to exercise active diligence in perserving liens, but no such duty is imposed in acquiring liens. Smith vs. Erwin, 77 N. Y. 466; Fa,rmerB Bank vs. Raynolds, 13 0. 85; Knight vs. Charter, 22 W. Va. 422; Sum- merhill vs. Tapp, 52 Ala. 227; Jer auld vs. Trippet, 62 Ind. 122; Craw ford vs. Gaulden, 33 Ga. 173; Thorn ton vs. Thornton, 63 N. C. 211 Union Bank vs. Govan, 18 Miss. 333, Except where the delivery of an execution to an officer ipse facto creates a lien on the debtor's prop- erty. In such cases the return of the execution without sale, by di- rection of the creditor, will amount to a release of a, lien which would discharge the surety. Dills vs. Cecil, 4 Bush (Ky.) 579; Ferguson vs. Turner, 7 Mo. 497. ii'' Hutchinson vs. Woodwell, 107 Pa. 509; Holliday vs. Brown, 33 Neb. 657 ; 50 N. W. 1042 ; Allen vs. O'Donald, 23 Fed. Rep. 573; New England Co. vs. Randall, 42 La. Ann. 260; 7 South. 679; McMullen vs. Hinkle, 39 Miss. 142. , In Wilbur vs. Williams, 16 E. I. 242; 14 Atl. 878, the creditor re- ceived from the principal a check for the debt and by agreement with the bank refused to pay the cbeck, the principal, held it for 15 days; the debtor in the meantime absconding, transferring all his assets; the surety claimed his discharge because of the delay in presenting the check, and the defense was held not to be good. Pauly Jail Bldg. Co. vs. Collins, 138 Wis. 494; 120 N. W. 225; Y. M. C. A. vs. Eitter, 90 Kan. 333; 133 Pac. 894. 144 THE LAW OF SUEETYSHIP. agencies. Thus where through the act of the Sheriff the prop- erty of the principal debtor is released from the levy of an exe- cution, the surety for the judgment debtor is discharged."* So where a judgment lien is obtained by the creditor upon land of the principal, ajid the creditor assigns his lien to one who. also acquired, by transfer from the principal, the land upon which the lien rests; this being by operation of law a merging of the lien in the fee, was held to release the surety.^^" A further illustration of the effect of a release of security by operation of law, arises in the case of intermediate endorsers upon commercial paper. The suretyship relation of parties so placed is that the intermediate endorser is in the situation of a surety, to whom the maker or prior endorser is principal, and the subsequent party is creditor. Hence if the holder fail to make demand upon the maker till the remedy is barred against him by the Statute of Lim^itations, the recourse of the endorser against the maker, which is his security, has been impaired by operation of law, and the endorser is discharged.^^" Also where the prior endorser is discharged by the holder, such prior indbrser is no longer liable to the intermediate en- dorser. This exoneration of the prior party from liability to the intermediate party, results from the operation of law, since to permit the intermediate "endorser to recover from the prior, under these circumstances, would merely enable the party who had been discharged to recover back from the holder, and so leave all the parties where they started, and to avoid this cir- cuity of iTseless action, the law applies the remedy directly, and discharges all intermediate parties ; but the basis of it is that a security available to a surely has been released by opera- tion of law.^^^ 118 Miller vs. Dyer, 1 Duv. (Ky.) See also Johnson vs. Young, 20 263; Lumsden vs. Leonard, 55 Ga. W. Va. 614. 374; Flemming va. Odum, 59 Ga. 120 Shutts vs. Fingar, 100 N. Y. 362. 539; 3 N. E. 588. But see Summerhill vs. Trapp, 48 121 Newcomb vs. Raynor, 21 Ala. 363. Wend. 108; English vs. Darley, 2 118 Wright vs. Knepper, 1 Barr Bos. & Pul. 61. (Pa.) 361. STJEETYSHIP DEFENSES. 145 The discharge of a debtor in bankruptcy, or under the State Insolvency Laws, while it deprives the surety of all recourse against the principal for his indemnity, will not release the Burety.^^'' §101. Release by the creditor of property of principal in his possession or control, but not held as security for the suretyship debt. The promisor in suretyship cannot claim his discharge be- cause of a relinquishment by the creditor of property of the principal, unless the property is so placed that the creditor is bound to hold it in special trust to pay the particular debt for which the promisor is liable. It is not enough that the cred- itor has in his possession the means of satisfying the debt, but he must also have the right, conferred upon him, either by law or by contract with the owner, to so apply the property. If the creditor holds funds of the principal arising out of some other transaction, he may pay the principal and proceed against the surety.^^** A bank holding the note of its depositor for which another is surety, is under no obligations to the surety to apply the deposits of the maker to the payment of the note. i22Alsop vs. Price, 1 Doug. 160; petitioners who institute proceed- Wolf vs. Stix, 99 U. S. 1 ; Lackey vs. ings in involuntary - bankruptcy Steere, 121 111. 598: 13 N. E. 518; against the principal, and joins with „, , „ „„.,„, Ti f other creditors in proposing a com- Steele vs. Graves, 68 Ala. 21-; Robin- position. Guild vs. Butter, 122 son vs. Soule, 56 Miss. 549; Coch- Mass. 498; Megrath vs. Gray, L. R., rane vs. Gushing, 124 Mass. 219; 9 C. P. 216; Ellis vs. Wilmot, L. R., Phillips vs. Solomon, 42 Ga. 192; l^ ^l' n'^^'?,F^°V^- Venning, L. m. o 1 1 o ct o. T) J^-) 10 Q- B. 406; Ex parte Jacobs, Sharpe vs. Speekenagle, 3 Serg. & R. [l r., iq Ch. 211 ; Browne vs. Carr, 463; Post vs. Losey, 111 Ind. 74; 12 2 Russ. 600. Post, Sec. 287. N. E. 121 ; Bank vs. Simpson, 90 N. Oomtro— Calloway vs. Snapp, 78 P ifi7 Ky. 561; In re McDonald, 14 N. b. -rt XT .• 1 T, 1 . A 4. f R. 477; Stull vs. Bedeo, 78 Neb. The National Bankruptcy Act of n^. jjq j^r ^ ggj 1867 (Revised Statutes U. S., Sec. The liability of a surety upon an 5118) also of 1898 (See. 16 of the appeal bond is not for the debt but Bankrupts Act) provide that the i? c?nt"igent upon the recovery of 1- u-i-i_ 1c i 1. 11 i u *"® judgment against the principal, liability of ^ surety shall not be jf ^^^ principal pending the appeal affected by the discharge of the prin- subsequently obtains a discharge in cipal as a bankrupt. bankruptcy, the surety on the ap- The surety is not discharged even l^l^ ^fi^^ js released House vs. ., . iv j-i. • * ii. Sehnadig, 235 111. 301; 85 N. E. though the creditor is one of the 395 123 Glazier vs. Douglass, 32 Conn. 146 THE LAW OF SUEETYSHIP. The bank may honor the cheeks of the maker of the note, after default, for the entire deposit, and hold the surety.^^* If the note is made payable at the bank, it is held that the surety is discharged if the bank does not apply the funds on deposit to the payment of the note,^^^ but only to the extent of the maker's credit with the bank.^-'" §102. Whatever releases principal will release the surety or guarantor. All defenses available to the principal may in general be resorted to in favor of the promisor in suretyship. If the principal has been released by the creditor, the surety or guarantor will be released.^^" This follows from the ele- mentary proposition of suretyship, that no collateral promise to pay the debt of another can have any force when the debt of the other has been satisfied, and since the equity of the prom- isor to have indemnity from the principal is cut off by this transaction, it would be manifestly unjust to require him to pay the debt. The reason which underlies the rule discharging the surety upon the release' of the principal does not apply, if the creditor, in his agreement to release, specifically reserves his remedies 393 ; Hollingsworth vs. Tanner, 44 125 Commercial Bank vs. Hennin- Ga. 11; Baubien vs. Stoney, 1 Speers ger, 105 Pa. 496; German Bank vs. Eq. (S. C.) 508; Perrine vs. Fire- Foreman, 138 Pa. 474; 21 Atl. 20; man's Ins. Co., 22 Ala. 575. Mechanics Traders Bank vs. Seitz, 12* Strong vs. Foster, 17 C B. UO Pa. 632; Home Ba^nk vs. New- 201; Nat'l Bank vs. Peck, 127 Mass. ton, 8 111. App. 563; 24 Atl. 356; 298; Vosa vs. German Bank, 83 111. Pursifull vs. Pineville Banking Co., 599; Nat'l Bank of Newburgh vs. 97 Ky. 154; 30 S. W. 203; Turner Smith, 66 N. Y. 271 ; Second Nat'l vs. Hampton, 30 Ky. Law Rep. 179; Bank vs. Hill, 76 Ind. 223; Martin 97 S. W. 761. vs. Mechanics Bank, 6 Har. & John. i^saLowe vs. Eeddan, 123 Wis. 235; People's Bank vs. Legrand, 103 90; 100 N. W. 1038. Pa. 309; First Nat'l Bank vs. 120 Cragoe vs. Jones, L. R., 8 Ex. Shreiner, 110 Pa. 188; 20 Atl. 718; 81; Ex parte Smith, 3 Bro. C. C. 1 ; Bank vs. Peltz, 176 Pa. 513; 35" Atl. Grundy vs. Meighan. 7 Ir. L. Rep. ■■218. 519; Bull vs. Coe, 77 Cal. 54; 18 Under the Uniform Negotiable Pac. 808; Trotter vs. Strong, 63 111. Inst— ments Act "where the instru- 272; Piano Mfg. Co. vs. Parmenter, ment is made payable at a bank 41 111. App. 635; Anthony vs. it is equivalent to an order to the Capel, 53 Miss. 350; Brown vs. bank to pay the same for tlie ac- Ayer, 24 Ga. 288; Riggin vs. Creath, count of the principal debtor 60 O. IS. 114; 63 N. E. 1100; Paddle- thereon. The Illinois, Nebraska ford vs. Thacher, 48 Vt. 574; State and iSouth Dakota Acts omit this vs. Parker, 72 Ala. 181; Lockwood. section. vs. Penn, 22 La. Ann. 29. SUEETYSHIP DEFENSES. 147 against the surety, because the principal by accepting such con- ditional release, thereby impliedly assents that the surety's right of indemnity shall not be impaired, and the surety not being injured should not be discharged."'' ]!Teither will the surety be discharged if he is fully indemnified in the transac- tion."' §103. Same subject — Release of principal by operation of law. Whenever the law will decree the annulment of the principal contract by reason of the fault or procurement of the creditor the surety or guarantor may set up the same de'fense. If the main contract is void by reason of a prohibition im- posed by statute, so that the principal can not be held, the prom- 12' It has been considered that a release of the principal, even re- serving rights against the surety, should operate to discharge the sure- ty, unless the so-called release is con- strued, by application of a fiction, to amount to a mere covenant not to sue, thus leaving the principal con- tract in force, but without any right of action upon it. Price vs. Barker, 4 Ellis & Black- burn 760, Coleridge, J'. (p. 776 ) : "To entitle the plaintiff to our judgment, it must appear that the deed oper- ated only as a covenant not to sue, and that the rights of the plaintiff as against the surety were preserved by the particular reservation in question, notwithstanding such cove- nant not to sue. "With regard to the first ques- tion, two modes of construction are for consideration. One, that, ac- cording to the earlier authorities, the primary intention of releasing the debt is to be carried out, and this subsequent provision foi- re- serving remedies against co-obligors and co-contractors should be re- jacted as inconsistent with the in- tention to release and destroy the debt evinced by the general words of release, and as something which the law will not allow, as being repug- nant to such release and extinguish- ment of the debt. The other, that, according to the modem authorities, we are to mould and limit the gen- eral words of the release by con- struing it to be a covenant not to sue, and thereby allow the parties to carry out the whole of their in- tentions by preserving the rights against parties jointly liable: . . . and we think that we are bound by modern authorities to carry out the whole intention of the parties as far as possible, by holding the pres- ent to be a covenant not to sue, and not a release." Nevill's Case, 6 Ch. 43; Ex parte Giflford, 6 Ves. 805; Bateson vs. Gosling, L. R., 7 C. P. 9 ; Bockville Bank vs. Holt, 58 Conn. 526; 20 Atl. 669; Mueller vs. Dob- schuetz, 89 111. 176; Boatmen's Bank vs. Johnson, 24 Mo. App. 316 ; Brown vs. Vermont Mutual Fire Ins. Co.. 83 Yt. 161; 74 Atl. 1061. 128 Jones vs. Ward, 71 Wis. 152; 36 N. W. 711; Moore vs. Paine, 12 Wend. 123. 148 THE LAW OP SURETYSHIP. isor in suretyship will be discharged. Not merely because tne promisor's right of indemnity is impaired but the collateral contract being executed with the intent of re-inforeing the main contract, partakes of its character, and is illegal.^-' "Where the main contract is the result of duress practised by the creditor upon the principal, no recovery can be had against the surety or guarantor.^''" ' Also where the contract between the principal and creditor fails by reason of a want of consideration, the collateral surety- ship contract also fails.^'' If the principal contract is obtained by the fraud of the creditor, the accommodation party may avoid his undertaking.^^^ If within the time allowed for the completion of a certain work the obligee makes it impossible for the contractor to perform the work there can be no recovery against the surety of the contractor.^^-" A judgment against the creditor in an action against the principal is conclusive against the creditor in a subsequent action against the surety or guarantor.^^' If the creditor having judgment against the surety, subse- quently brings action against the principal, and fails to recover judgment, the surety may have the judgment against him set aside, since the principal liability has been extinguished by operation of law; and it is of no importance that the surety failed to plead a proper defense, or was negligent in asserting his rights; a subsequent adjudication in favor of the principal is under all circumstances available to the surety.^^* i2!> Swift vs. Beers, 3 Denio 70 ; isi Sawyer vs. Chambers, 43 Barb. Morse vs. Hovey, 9 Paige 197; Eus- 622; Scroggin vs. Holland, 16 Mo. sell vs. Failor, 1 0. S. 327; Mound 419; Gunnis vs. Weigley, 114 Pa. vs. Barker, 71 Vt. 253; 44 Atl. 346. 191 j 6 Atl. 465. isoOsborn vs. Bobbins, 36 N. Y. ■ i32 Putnam vs. Schuyler, 4 Hun 365; Ante Sec. 14. 166; Bryant vs. Crosby, 36 Me. 562; It is held that duress is a personal Parshall vs. Lamoreaux, 37 Barb, defense, £^nd that duress of tlie prin- 189. cipal will not avoid the obligations isso People of Porta Rico vs. Title of a surety, unless the surety at the Guaranty & Surety Co., 227 U. S. time of executing the obligation was 382 ; Hubbard vs. Reilly, 98 N. E. ignorant of the circumstances which 886, 51 Ind. App. Id. render it voidable by the principal. i33 state vs. Parker, 72 Ala. 181; If the surety has knowledge of the Baker vs. Merriam, 97 Ind. 539; duress, he knows that he has no State vs. Coste, 36 Mo. 437 ; Stoops remedy against the principal, and it vs. Wittier, 1 Mo. App. 420; Brown is not therefore misled. Hazard vs. vs. Bradford, 30 Ga. 927; Crim vs. Griswold, 21 Fed. Rep. 178 ; Gra- Wilson, 61 Miss. 233 ; Gill vs. Mor- ham vs. Marks, 98 Ga. 67; 25 S. E. ris, 11 Heisk. 614. 931. 134 Ames vs. Maclay, 14 la. ZS'l; SUEETYSHIP DEFENSES. 149 §104> Same subject — In cases where the release by operation of law is not the result of the fault or procurement of the creditor. If the defense of the principal is personal, and disconnected ■with any act or fault of the creditor, the liability of the surety or guarantor is not impaired. If the principal is incapacitated by reason of coverture, such defense is not available to the promisor in suretyship ^^^ and this seems to be the rule whether the promisor has knowledge of such incapacity at the time he signs or not. If the principal is insane at the time of the execution of the main contract, and the creditor has. no knowledge of the inca- pacity, it constitutes a personal defense available only to the prineipal.^^' But if the principal is incapacitated by insanity after the execution of the contract, and before default, it is held to discharge, the surety.^"^ The same rule is applied where the principal is an infant; the surety or guarantor is -presumed to have contracted against suck disability, and this defense can only be set up by the infant himself,^'* except in cases where the infant disaffirms the eon- Norris vs. Pollard; 75 Ga. 358; vis vs. Statts, 43 Ind. 103; Whit- Dlckason vs. Bell, 13 La. Ann. 249; worth vs. Carter, 43 Miss. 61; Lo- Miller vs. Gaskins, Sm. & M. Ch. baugh vs. Thompson, 74 Mo. 600; (Miss.) 524. Allen vs. Berryhill, 27 la. 534; Weed 135 Winn vs. Sanford, 145 Mass. Sew. Maeh. Co. vs. Maxwell, 63 Mo. 302; 14 N. E. 119, Devens, J.: 486; Wiggins' Appeal, 100 Pa. 155; " It is true, as a general proposition, Davis vs. Commissioners, 72 N. C. that the liability of a guarantor or 441 ; St. Albans Bank vs. Dillon, 30 of a surety is limited by that of Vt. 122 ; Gates vs. Tebbetts, 83 Neb. his principal. But to this there 573; 119 N. W. 1120. ' are certain exceptions. Thus, where i36 Lee vs. Yandell, 69 Tex. 34 ; the principal is excused from liabil- 6 S. W. 665. ity for reasons personal to himself, 137 Grove vs. Johnstone, L. R. 24 and which do not affect the debt he Ir- 352; Fuller vs. Davis, 1 Gray has incurred or the promise he has t' at,- j.\. ■ • i ^ in this case the principal gave made, the surety would not be enti- bond for his appearance on a crim- tled to the benefit of this excuse. inal charge and afterwards became In such case, he is, in a certain insane and was committed to a. „„„„„ . J J . , J lunatic asylum, and the surety upon sense, an independent promisor, and ^^^ j,^^ ^^^^ Vas discharged. must perform his promise." But see Adler vs. State, 35 Ark. Kimball Ts. Newell, 7 Hill 116; 517. Erwin vs. Downs, 15 N. Y. 576; Da- ^ '.'* Kuns vs. Young, 34 Pa. 60; ' Baker vs. Kennett, 54 Mo. 82. 150 THE LAW OF SUEETYSHIP. tract, and the consideration is restored to the creditor."*' Where the main contract is ultra vires, and on that account void, and a third party signs as surety or guarantor, with knowledge of the Qharacter of the principal contract, he will be bound/^" One guaranteeing the debt of a corporation cannot defend on the ground of usury, if, by statute, the corporation can not do so.^^"" If the contract between the principal and the creditor is in- complete, and on that account is declared invalid, the surety who has knowledge, or means of knowing of such infirmity in the contract at the time he signs, will be liable. Such a case would be where a partner signs a firm name without authority, or one of several joint obligors fails to sign.^^" §105. Suretyship obligations obtained by fraud of the creditor. A promisor in suretyship may avoid his contract for a fraud- ulent misrepresentation of facts by the creditor, by which he was induced to make the contract.^*' It is not necessary that the creditor have knowledge of the falsity of the representation which he makes. It is the falsity of the statement, not the motive of the creditor, which has injured the surety.^*^" Secret stipulations entered into between the creditor and principal, of which the promisor has no knowledge, and which make the real contract different from that which it purported to be, are a fraud upon the surety or guarantor. Thus the prin- cipal was indebted to the creditor, and purchased with another as guarantor, merchandise from the creditor, at a price higher than the market price, with the understanding that the excess above the market price, was to be applied to the dischai^e of the old debt. This arrangement, not communicated to the i3So Keokuk County Banlc vs. Mass. 72, dissenting opinion. Wells, Hall, 106 Iowa .540; 82 N. W. 552. J.; Stewart vs. Behm, 2 Watts. 356 139 Yorkshire Railway Wagon Co. (Semble). vs. Maclure, L. R., 19 Cli. 478; l" Allen vs. Houlden, 6 Beav. Weare vs. Sawver, 44 N. H. 198; 14S; Evanj vs. Keeland, 9 Ala. 42; Mason vs. Nichols, 22 Wis. 360; Fishburn vs. Jones, 37 Ind. 119; Holm vs. Jamieson, 173 111. 295; 50 Fenter vs. Obaugh, 17 Ark. 71; N. E. 702. Marchman v.. Robertson, 77 Ga. 40; l39oig!alvin vs. Myles Realty Co., Waterbury va. Andrews, 67 Mich. 227 N. Y. 51; 124 N. E. 94. 281; 34 N. W. 575; ante, Sec. 15. 140 McLaughlin vs. McGovern, 34 i^io Bank vs. Richmond, 235 Mo. Barb. 208; Sterns vs. Marks, 35 532; 139 ®. W. 352. Barb. 565; Russell vs. Annable, 109 SUEETYSHIP DEFENSES. 151 guarantor, was held to be a fraud, for which he was entitled to be released.**^ Again the creditor represented to the surety that the debt had been compromised, and that the note which the surety signed, was in full settlement, whereas, the principal was, by the terms of settlement, required to give his unsecured note for an additional amount. This was considered a fraud upon the surety, since the inducement to his contract was the benefit he supposed he was to confer on the principal by enabling him to compromise his debt.^*^ The surety has the right to insist that the principal receive the precise benefit which the creditor stipulated that he should receive, and the contract may be avoided by any vnlful deceit practiced upon the surety in this respect. It is not sufficient to show that the benefit to the principal in the contract which was made, was equal in value to that which the creditor stipu- lated, but if the surety has been induced by deceit to enter into a. bargain which he did not intend, he need not stand by it.^** 142 Pidcock vs. Bishop, 3 Barn. & Cr. 605. 143 Weed vs. Bentley, 6 Hill 58; Pendlebury vs; Walker, 4 Younge & G. Ex. 424. Powers Dry Goods Co. vs. Harlin, 68 Minn. 193; 71 N. W. 16. In this case the principal made settlenient with his creditors for a composition at 33 1-3 per cent., and with one of the creditors he made a secret agree- ment to pay a larger sum. The surety upon the note of the creditor making this secret arrangement, was held to be discharged. The Court said: "The object of that agree- ment was to release the debtors from a portion of their indebtedness, and the sureties entered into their con- tract for this purpose, induced so to do by ike representations and belief that the debtors were to be freed and released from any further lia- bility. In this they were deceived, and through the concealment of the plaintiff, payee of the notes, the ob- ject was not attained. By reason of the fraud it was within the power of innocent creditors to ig- nore the composition, and recover the balance due upon their claims. The ability of the debtors to meet their notes or to indemnify the sure- ties was hazarded and impaired at once by the contingency," But see Mead vs. Merrill, 30 N. H. 472 ; Booth vs. Storrs, 75 111. 438. i** Trammel! vs. Swan, 25 Tex. 473; Ham vs. Grpva, 34 lud. 18; Haworth vs. Crosby, 120 Iowa 612; 94 N. W. 1098; Machin vs. Pruden- tial Trust Co., 210 Pa. 253; 59 Atl. 1073; Atlantic Trust & Deposit Co. vs. Union Trust Co., 110 Va. 286; 67 S. E. 182; Ward vs. National Surety Co., 152 S. W. 397; 167 S. W. 579. In this case the surety was in- duced to sign the note on the repre- sentation, that it was in payment for gooda then being sold to the principal, but in fact, it was in settlement of a pre-existing debt. 152 THE LAW OF SUEETYSflij?. §106. Same subject - the creditor. ■ Concealment or non-disclosnre of facts by A concealment or suppression of material facts which affect the risk of the promisor will amount to fraud and constitute a defense to the suretyship promise. The law requires good faith on the part of the beneficiary of the contract, and it is the duty of the creditor to disclose information which he has con- cerning the principal which, if known to the promisor, would prevent him from entering into the contract. ^*° If the creditor is applied to for information, or if the cir- cumstances are such that the promisor is in a relation of confi- dence with the creditor, a failure to disclose everything within his knowledge, that is material for the promisor to know, is equivalent to an affirmative misrepresentatioiL^*^ It is not necessary to show that the concealment or failure to disclose facts material for the surety to know is wilful, or with intent to deceive.^*' It is sufficient if the non-disclosure is oonstruo- 1*5 Ante Sec. 15. 1*6 Bank vs. Anderson, 65 la. 692 ; 22 N. W. 9>29; Remington Sew. Mach. Co. vs. Kezertee, 49 Wis. 409 ; 5 N. W. 809; Harrison vs. Lumber- men Ins. Co., 8 Mo. App. 37 ; Barnes vs. Century Savings Bank, 128 N. W. 541; 149 la. 367; Putney vs. iSehmidt, 120 Pac. 720; 16 N. M. 400; Lauer Brewing Co. vs. Riley, 195 Pa. 449; 46 Atl. 71; Damon vs. Empire State Surety Co., 161 App. Div. 875. Benton Co. Bank vs. Boddicker, 105 la. 548; 75 N. W. 632, Bolin- son, J.: "The contract of surety- ship is, as a rule, for the benefit of the creditor, he is, in dealing with the surety, to observe the utmost good faith, and if he fail to do so, without a sufficient excuse for his neglect, the surety will be discharged to the extent to which he suffers by reason of the lack of good faith on the part of the creditor. If* the Burety applies to the creditor for information respecting the princi- pal which the creditor has, and may properly give, but which he with- holds without sufficient cause, or if he knowingly give false information, lie, and not the surety should suffer the loss occasioned by the wrong." i-''^ Railton vs. Mathews, 10 iClark & Fin. 934, Lord Camplell: "If the defenders (creditor) had facts within their knowledge which it was material the surety should be ac- quainted with, and which the defend- ers did not disclose, in my opinion the concealment of those facts, the undue concealment of those fadts, discharges the surety; and whether they concealed those facts from one motive or another, I apprehend is wliolly immaterial. It certainly is wholly immaterial to the interest of the surety, because to say that liis obligations shall depen'd upon that which was passing in the mind of the party requiring the bond ap- pears to me preposterous; for that would' make the- obligations of the surety depend on whether the other party had a good memory, or whether he was a person of good STJEETYSHIP DEFENSES. 153 tively fraudulent, and the preponderance of authority estab- lishes such fraud from the mere failure to disclose material facte."* The creditor can not avoid his duty in this respect, by main- taining an opinion that the undisclosed facts were not material, any more than a surety could be released because he was willing to say that he considers the undisclosed facte material, and would not have signed had he known the facte. In both cases, the question of materiality is to be adjudicated and not merely asserted by the parties. sense, or whether he had the motive in his mind, or whether he was aware that those facts ought to be disclosed. -The liability of a surety must depend upon the situation in which he is placed, upon the knowl- edge which is communicated to him of the facts of the case, and not up- on what was passing in the mind of the other party, or the motive of the other party. If the facts were such as ought to have been communi- cated, if it was material to the sure- ty that they should be communi- cated, the motive for withholding them, I apprehend, is wholly im- material." Fidelity &. Deposit Co. vs. Moshier, 151 Fed. 806; London General Omnibus Co. vs. HoUoway, 2 K. E. 72 (1912). 148 Bellevue Loan & Bldg. Ass'n vs. Jeckel, 46 S. W. Rep. (Ky.) 482; Dinsmore vs. Tidball, 34 0. IS. 411; Wells, Fargo & Co. vs. Walker, 9 N. M. 456; Conn. Life Ins. Co, vs. Chase, 72 Vt. 176 ; 47 Atl. 825 ; Wil- son vs. Monticello, 85 Ind. 10; Fass- nacht vs. Emsing Gagen Co., 18 Ind. App. 80; Traders' Ins. Co. vs. Her- ber, 67 Minn. 106; 69 N. W. 701; Denton vs. Butler, 99 Ga. 264; 25 S. E. 624; Third Nat'l Bank vs. Owen, 101 Mo. 558; 14 S. W. 632; Fire, etc., Assurance Co. vs. Thomp- son, 68 Cal. 208; 9 Pac. 1; Indiana & Ohio Live Stock Ins. Co. vs. Bender, 32 Ind. App. 287; 69 N. E. 691; Damon vs. Empire State iSurety Co., 161 App. Div. (N. Y.) 875 ; Cooper Process Co. vs. Chicago Bonding & Surety Co., 262 Fed. 66 ; 8 A. L. R. 1477, 1485, annotated note. Contra — Lake vs. Thomas, 84 Md. 608; 36 Atl. 437. Hamilton vs. Watson, 12 iClark & Fin. 109, Lord Campbell: "If such. was the rule, it would be indispen- sably necessary for the bankers to whom the security is to be given to state how the account has been kept; whether the debtor was in the habit of overdrawing; whether he was punctual in his dealings; whether he performed his promises in an honorable manner— for all these things are extremely material for the surety to know. But unless the questions be particularly put by the surety to gain this information, I hold that it is quite unnecessary for the creditor, to whom the surety- ship is to be given, to make any such disclosure." Xorth British Ins. Co. vs. Lloyd, 10 Excq. 523, holding that the re- quirement of disclosure without in- quiry incident to contracts of in- surance does not apply to contracts in suretyship, distinctly rejecting the doctrine in this respect an- nounced in Owen vs. Homan, 3 Mac. & G. 378; Davies vs. London & P. Marine Ins. Co., L. R., 8 Ch. Div. 469; Magee vs. Manhattan Life Ins. Co., 92 U. S. 93; San Francisco vs. Staude, 92 Cal. 560; 28 Pac. 778. A non-disclosure of the insolvency of the principal, is generally held not to amount to a fraud. Ham vs. Greve, 34 Ind. 18 ; Farmers Bank vs. Braden, 145 Pa. 473; 22 Atl. 1045. 154 THE LAW Ol<- SUEETYSHIP The surety or guarantor will not be discharged, however, if the undisclosed facts were not known to the creditor. Fraud will not be imputed because the creditor by reason of negli- gence or inattention to his own affairs, does not know of the facts which materially affect the surety risk.^*° It has been held that where the facts are known to the cred- itor, and materially affect the risk of the promisor, that the creditor can not evade his duty of disclosure, merely by showing that the suretyship promise was solicited by the principal, and that the creditor had no communication with the promisor, and that no opportunity for disclosure was afforded. The accept- ance of the promise under such circumstances, is considered as an implied misrepresentation that only the ordinary risks of suretyship were being assumed.^^"' 1*0 Liebermau vs. First Nat'l Bamk, 40 Atl. Rep. 382; Tapley vs. Martin, 116 Mass. 275; Franklin Bank vs. Stephens, 39 Me. 532; Farmington vs. Stanley, 60 Me. 472; Wayne vs. Bank, 52 Pa. 343; Ana- heim Co. vs. Parker, 101 Cal. 483; 35 Pac. 1048; Bawne vs. Mt. Holly Bank, 45 N. J. 360; Saving^ Bank vs. Albee, 63 N. H. 163 ; Hudson vs. Miles, 185 Mass. 582; 71 N. E. 63; Brillion Lumber Co. vs. Barnard, 131 Wis. 284; 111 N. W. 483. But see Graves vs. Bank, 10 Bush (Ky.) 23. 150 Lee vs. Jones, 17 C. B. (N. S.) 482; distinguishing Hamilton vs. Watson, and North Britisli Ins. Co. vs. Lloyd, Ubi Supra. In this case the bond was arranged for by the principal. The surety had no com- munication with the creditors. The form of the bond was prepared by the creditors, and it recited that the principal had been for some time in their employ, and that they had required him to give a bond as a ■condition of continuing in their em- ploy. The creditors sent a messen- ger to receive the bond who had no authority to make disclosures or an- swer inquiries. The principal was in default for a large amount at the time the bond was executed as was well known to the creditors. These circumstances were held to constitute a fraud by the creditors on the surety. Blackburn, J. : "I think that great practical mischief would ensue if the creditor were by law required to dis- close everything material known to him, as in a case of insurance. If it were so, no creditor could rely upon a contract of guarantee unless he communicated to the proposed sureties everything relating to his dealings with the principal, to an extent which would in the ordinary course of things be so vexatious and annoying to the principal and hia friends, the intended sureties, that such a rule of law would practically prohibit the obtaining of contracts of suretyship in matters of business. This is well pointed out by Lord Campbell in his judgment in Hamil- ton vs. Watson. But I think, both on authority and on principle, that, when the. creditor describes to the proposed sureties the transaction proposed to be guaranteed (as in general a creditor does), that de- scription amounts to a representa- tion, or at least is evidence of a representation!, that there is noth- ing in the transaction that might not naturally be expected to take place between the parties to the transaction such as that described, and, if a representation to this ef- fect is made to the intended surety by one who knows that there is something not naturally to be ex- pected to take place between the parties to the transaction, and that this is unknown to the person to whom he makes the representation, and that, if it were known to him, he would not enter into the contract of suretyship, I think it is evidence of fraudulent representation on his part In the present case, the plaintiffs had no personal com- SURETYSHIP DEFENSES. 155 In the absence of specific inquiries no duty rests upon the creditor to disclose what he knows concerning the irregularity of the principal in his conduct growing put of other transac- tions than the one which is the subject of the suretyship.^"^ Unauthorized statements made to the surety by agents of the creditor which induce the surety to sign the bond will not bind the creditor, in the absence of any ratification by the creditor.^"^" raunication with the defendant, the surety; and when they sent the agreement to him for execution, they sent it by an agent who had no authority from tlie plaintiffs to make any statement whatever, or to do anything more than obtain the defendant's signature to the agree- ment thus sent. "The argument for the plaintiffs before us was, in substance, that, under such circumstances, though there might be a concealment or non- disclosure of material facts, there was not and could not be any mis- representation on the plaintiffs' part; and that, without it, there could be no fraud Now, whether the handing the agreement by the plaintiffs to the defendant amounted to an inaccurate repre- sentation or not, depends, as I think, on the question whether in such a transaction as that described in the agreement, it might or might not naturally be expected that the masters might have allowed a bal- ance of this extent to accumulate, and might have allowed the account to stand over unsettled for so long a time The improbability that anyone could suppose that sure- ties would have entered into such an agreement if they had known the truth, is so great that the jury might well think that the plaintiffs knew that the defendant was in ig- norance of it." See also Sooy vs. State of New Jersey, 39 N. J. L. 13.5, where a bond of the Treasurer of the State was accepted, without any communi- cation between the parties, except that the State furnished the form of bond. The fact of previous defalca- tions being known to the State, it was held to be a fraud not to dis- close this to the surety, and it is placed upon the ground that the continuance of the Treasurer in of- fice amounts to a, tacit assertion by the State that his past conduct was regular, and that on this account, the silence of the State was equiva- lent to deceit. But see Cawley vs. People, 95 111. 249; Aetna Co. vs. Mabbett, 18 Wis. 698. In Julius Winter & Co. vs. For- rest, 145 Ky. 581; 140 S. W. 1005, Lassing, J.: "Clearly, if the obligee had nothing whatever to do with the execution of the bond, and the surety was induced by the employe alone to sign the bond, without the knowledge of his principal and in the absence of the principal, it would be a manifest injustice to hold the bond invalid as to the surety be- cause the principal had not disclosed to him such facts as he may have known bearing upon the employe's honesty and integrity, for no oppor- tunity was given to him to make such disclosure. In such case, if the surety wants the protection of the law, he must give to the obligee an opportunity to make disclosures relative to any fact touching his employe's honesty, reliability, etc., within his knowledge, and until such opportunity is given it must be pre- sumed, and conclusively presumed, tli^ the' surety is satisfied to act uptSn his own initiative, or such in- formation as the obligor gives him; and in such cases the surety may not escape liability on the ground that the obligee failed to disclose to him information possessed by the obligee at the time, which if given, would have increased the risk of the surety and possibly prevented him from signing the bond." 151 Bostwick vs. Van Voorhis, 91 N. Y. 353; Screwmen vs. Smith, 70 Tex. 168; 7 S. W. 793; Home Ins. Co. vs. Holway, 55 la. 571; 8 N. W. 457 isioJda County Sav. Bank vs. Seidensticker, 92 N. W. 863; 128 la. 54; Watertown Sav. Bank vs. 156 THE LAW OF SUEETYSHIP. §107. Discharge of promisor by failure to disclose facts coming to the knowledge of the creditor, after the execution of the contract. The requirement of good faith continues after the execution of the contract, and the creditor owes a duty to the promisor, in a continuing or executory contract of suretyship, to disclose to him such acts of the principal, as materially affect the prom- isor's risk, and for which, the creditor himself might put an end to the main contract. Such duty of disclosure rests upon the theory, that the cred- itor who receives advancements from the- principal on the credit of a guarantor, or continues the principal in his service for whose honesty another has become surety, with knowledge that the principal has violated his agreement or is unworthy of trust, actively conspires to assist the principal in committing a de- fault, and that such conduct contains the same elements of fraud as the concealment of similar facts at the time of the exe- cution of the contract.^'^^ This rule, however, can not be applied without manifest in- justice, except in those cases where the default is such that the creditor can put an end to the contract, and so avoid loss inci- dent to future advancements, or a further continuance of the principal in his service. Where there is a continuing guaranty for future delivery of merchandise, if the principal becomes insolvent, the creditor can not on that account refus© to ship the goods, since the inability of a party to perform his contract, in the absence of fraud, is not a ground for rescission, and a failure to disclose these facts to the guarantor, violates no implied duty, as Mattoon, 78 Conn. 388; 62 Atl. 622; (L. R., 4 Ir. 397; Conn. Insurance see also Hogue vs. State, 28 Ind. Co. vs. Scott, 81 Ky. 540: Roberts App. 285; 62 X. E. 656; America T'", ^""^""^"'cnn" S^?' x^^^'w^r. ^^''• -r „ -n , n.,n TT c TOO 180; 11 Pac. 599; iSaint vs. Wheeler, Ins. Co. vs. Pauley, 170 U. S. 133; gg ^la. 362; 10 South. 539; Rapp. Sherman va. Harbin, 125 Iowa 174; vs. Phoenix Co., 113 111. 390; Hebert 100 N. W. 629; Sewell vs. Breathitt vs. Lee, 118 Tenn. 133; 101 'S. W. Lodge, 150 Ky. 542; 150 S. W. 677. '^'^^' Hartford Ins. Co. vs. Casey, -.Phillips vs. Foxall, L. R., 7 ^'^ *^°- ^^P" ^'^■' ''' «• ^^ ^'^^■ Q. B. 666; Sanderson vs. Aston, L. ,,^^*,::^er':'59*^I^'35t-' ""'■ ''''■ R.,. 8 Exch. 73; Enright vs. Falvey, SUKETYSHIP DEFENSES. 15* the creditor is not obliged to use any such diligence in taking •care of the interests of the guarantor. While such information would be useful to the promisor in enabling him to watch the affairs of the principal, yet, the duty of disclosing these facts, can rest upon no other basis than that of the giving of notice to the promisor of non-payment at ma- turity, which can only be required where the contract, either expressly or by implication, so recites.^^^ Neither should the creditor be required to give notice to the promisor of a mere breach of contract on the part of the princi- pal, although such conduct might materially affect the risk. Thus an agent of an Insurance Co. gave bond that he would perform his duties as such agent as required by the by-laws of the Company. One of the by-laws provided that he should pay each month the balance due the Company, and it was held that the Company owed no duty to the surety to disclose the default of the Agent in failing to pay over the balances from month to month, where no fraud or dishonesty by the agent was shown, even tliough the default of the agent was of such a character as to authorize his discharge by the Company.^^* The surety upon such a bond would be liable for a default occasioned by sickness or accident or any other merely casual circumstances, yet the creditor loses none of his rights against the surety by indulging the principal in such default to the end of his contract, and omitting notice to the promisor of the de- faults as they oceur.^^^ If the acts of fraud or dishonesty by the principal, are not, known to the creditor, the duty of disclosure does not apply even though the creditor, by the exerei^e of ordinary diligence, 153 Ante See. 69. See also ^Etna Co. vs. Fowler, 108 i54Watertown Fire Ins. Co. vs. Mich. 557; 66 N. W. 470; Lanca- Simmons, 131 Mass. 85. shire Co. vs. Callahan, 68 Minn. But see Morrison vs. Arons, 65 277; 71 N. W. 261; Charlotte K. R. Minn. 321 ; 68 N. W. 33 ; Fidelity Co. vs. Gow, 59 Ga. 685 ; Wilkerson Mutual Life Assn. vs. Dewey, 54 L. vs. Crescent Co., 64 Ark. 80; 40 S. E. A. 945 (Minn.). W. 465; Phoenix Ins. Co. vs. Find- 155 McKecknie vs. Ward, 58 N. Y. ley, 59 la. 591 ; 13 N. W. 738 ; 541; Atlantic & Pacific Telegraph Wilmington R. R. Co. vs. Ling, 18 Oo. vs. Barnes, 64 N. Y. 385. S. C. 116. 158 THE LAW OF SURETYSHIP. might have discovered the default. Such diligence need not be exercised in the interest of the surety or guarantor."" The promisor will not be discharged because the creditor conceals from him misconduct of the principal which is not directly connected with the subject matter of the suretydiip."' §108. Fraud and misconduct of the principal. A suretyship contract induced by the fraud of the principal is nevertheless valid as against the promisor, in all eases in which the creditor has no knowledge of the fraud, and has not by his own conduct assisted in perpetrating the fraud."' Many cases have arisen in which a surety has refused to sign unless another will sign as co-surety, and the principal, to induce the making of the contract, forges the name of the co-surety. Two theories have obtained respecting the liability of the surety under these circumstances. One, that it is the duty of the creditor not to accept an obli- gation without such investigation as will disclose whether the signatures are genuine, that the surety signs upon the implied condition that no advancements will be made unless the con- tract is in fact what it purports to be, the valid obligation of all the parties, and that a creditor has no right to remain in passive ignorance as to the character of the contract he is ac- cepting."" The other, and by far the most generally accepted theory, and the one supported by the most satisfactory reasoning, is, that whether the signing by the sjurety is before or after the 156 Newark vs. Stout, 52 N. J. L. ^'-^ Sharp vs. Allgood, 100 Ala. 35; Frelinghuysen vs. Baldwin, 16 183; 14 South. 16; Cornell vs. The Fed. Eep. 452; Phillips vs. Bossard, People, 37 III. App. 490; Southern 35 Fed. Eep. &9; Atlas Bank vs. Cotton Oil Co. vs. Bass, 126 Ala. Brownell, 9 E: I. 168. 343 ; 28 So. 576 ; Stone vs. Goldberg i!>r LaEose vs. Logansport Bank, & Lewis, 6 Ala. App. 249, 60 So. 102 Ind. 332; 1 N. E. 805. In this 744. In these cases the surety case the creditor is shojvn to have signed after the forgery. A much had knowledge of the excessive in- stronger case would seem to be made temperance of the principal, whicsh where the surety signs before the was the approximate cause of his forgery, and so avoid the same defalcations. charge of negligence imputed to the 158 Ante Sec. 74, Note 8. creditor. Contra— W. T. Ealeigh Medical • Co. vs. Wilson, 60 So. 1001. SUBETYSHIP DEFBaSrSES. 159 forgery, the paper comes to the creditor bearing a stamp of trust and confidence by the Surety in the principal, and the creditor should not suffer because of a breach of this confi- dence, but the loss should rather fall upon the one who held out the principal as worthy of trust/"" A misrepresentation made to the promisor by the principal cannot prevail against the creditor who parts with a considera- tion in good faith, relying upon the surety, and without knowl- edge of the fraud. The creditor is not bound to investigate each transaction and ascertain whether the surety or guarantor has been deceived/""^ If false representations are made by a third person without the knowledge or procurement of the creditor, the promisor is not thereby released.^"" §109. Misconduct of the principal, by delivering suretyship obligations without complying with conditions. A creditor making advances in good faith, cannot be held responsible for a breach, by the principal, of conditions imposed by the surety or guarantor, not communicated to the creditor.'"''" 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, 100 Stoner vs. Millikin, 85 111. vs. Trader's Deposit Bank, 55 S. W. 218; Stern vs. People, 102 111. 540; 552; 107 Ky. 653; Sewell vs. Wayne Co. vs. CardTyell, 73 Ind. Breathitt Lodge, 150 Ky. 542; 150 555; State vs. Hewitt, 72 Mo. 603; S. W. 677; Saginaw Medicine Co. Veach vs. Rice, 131 U. S. 293; 9 S. vs. Batey, 179 Mich. 651. Ct. 730; Chase vs. Hawthorn, 61 Bank of Australasia vs. Reynell, Me. 505; Kansas City Terra Cotta 10 New Zealand L. R. 257. In this Lumber Co. vs. Murphy, 49 Neb. 674 ; case the guarantor was told by the 68 N. W. 1030 ; Vass vs. Riddick, 89 principal that the letter of credit N. C. 6; Loew vs. Stocker, 68 Pa, 226. was for £500, and the guarantor 181 Marks vs. First Nat'l Bank, signed without Heading, relying up- 79 Ala. 550; Ladd vs. Board, 80 lU. on the statement of the principal. 233; Davis Co. vs. Buckles, 89 111. Tlie letter of credit was for £5,000, 237; Lucas vs. Owens, 113 Ind. 521; and the creditor made advancement 16 N. E. 196; Martin vs. Campbell, of the full amount without knowl- 120 Mass. 126 ; Page vs. Krekev. 137 edge of the fraud. Held, that the N. Y. 307; 33 >.'. H. 31 1; Johnston guarantor was liable. vs. Patterson, 114 Pa. 398; 6 Atl. i62 Lumber Co. vs. Buchtel, 101 746; Kulp vs. Brant, 162 Pa. 222; U. S. 638; Brown vs. Davenport, 76 29 Atl. 729 ; Quinn vs. Hard, 43 Vt. Oa. 799 ; Sewell vs. Breathitt Lodge, 375; Gromberg vs. Fidelitv ■& De- 150 Ky. 542; 150 S. W. 677. posit Co., 139 Ala. 338; 36 'So. 622; i62o Seitz Brewing Co. vs. Ayres, Hudson vs. Miles, 185 Mass. 582; 71 60 N. J. E. 190; 46 Atl. 535; Grit- N. E. 63 ; Ripley Bldg. Co. vs. Coors, man vs. U. S. F. & G. Co., 41 Wash. 37 Col. 78: 84 Pac. 817; Wheeler 77; 83 Pao. fi. 160 THE LAW OF SURETYSHIP. that the obligation should not be delivered until another had signed as co-surety. The estoppei against the promisor is clear ; he should not be heard to assert a defense which works an in- jury to another, and which is based upon his own neglect in failing to communicate the condition to the creditor.^"' Against this view has been urged a somewhat technical ap- plication of the doctrine of Special Agency, with the conclusion, that since the surety authorizes the principal to make delivery of the paper only on condition, and is a special agent, he can not bind his principal, the promisor, except within the strict terms of his agency.^®* If the body of the bond or other instrument contains the names of co-obligors whose names do not appear as signers, such circumstance is considered sufficient to put upon the cred- itor the burden of ascertaining whether the instrument is de- livered in accordance with the understanding of the prom- isor.^^^ i63Dair vs. United States, 16 Wall. 1; Tidball vs. Halley, 48 Cal. 610; Wai-d vs. Hackett, 30 Minn. 150; 14 X. W. 578; Mathis vs. Mor- gan, 72 Ga. 517; Rhode vs. McLean, 101 111. 467; Mowbray vs. State, 88 Ind. 324; Gibbs v. Johnson, 63 Mich. 671; 30 X. W. 343; State vs. Churchill, 48 Ark. 426; 3 S. W. 352, 880; Lewiston vs. Gagne, 89 Me. 395; 36 Atl. 629; Micklewait vs. Noel, 69 la. 344; 28 N. W. 630; North Atchison Bank vs. Gay, 114 Mo. 203; 21 S. W. 479; Brumback vs. German Bank, 46 Neb. 540; 65 N. W. 198; Russell vs. Freer, 56 N. Y. 67; Vass vs. Riddick, 89 N. C. 6; Whitaker vs. Richards, 134 Pa. 191; 19 Atl. 501; Dun vs. Garrett, 93 Tenn. 650; 27 S. W. 1011; Ballow vs. Wichita Co., 74 Tex. 339; 12 S. W. 48 ;_ Belden vs. Hurlbut, 94 Wis. 562; 69 N, W. 357; Fuller vs. Du- pont, 183 Mass. 596; 66 X. E. 672; Baker County vs. Huntington, 46 Or. 275; 79 Pac. 187; Cowan vs. Rob- erts, 134 N. C. 415; 46 S. E. 979; Hendry vs. Cartwright, 89 Pac. 309 ; Williams vs. Morris, 138 S. W. 464; 99 Ark. 319. Contra — Johnston vs. Cole, 103 la. 109; 71 N. W. 195. It has been held that the delivery of the obligation by a stranger who holds it in escrow, and in violation of his trust, will bind the promisor, if the creditor accepts the same in good faith. Taylor Co. vs. King, 73 la. 153; 34 N. W. 774; McCormick Co. vs. McKee, 51 Mich. 426; 16 N. W. 796. 16* People vs. Bostwick, 32 N. Y. 445; King vs. State, 81 Ala. 92; 8 South. 159; Evans vs. Daughtry, 84 Ala. 68; 4 South. 592; State vs. Allen, 69 Miss. 508; 10 South. 473; W. T. Raleigh Medical Co. vs. Wil- son, 60 So. 1001. 105 Pawling vs. United States, 4 Cranch 219; Allen vs. Marney, 65 Ind. 308; Hessell vs. Johnson, 63 Mich. 623; 30 N. W. 209; Ward vs. Churn, 18 Grat. 801; Baker County vs. Huntington, 46 Or. 275; 79 Pac. 187. Contra — Grim vs. Jackson Tp., 51 Pa. 218. See also Whitaker vs. Richards, 134 Pa. 191; 19 Atl. 501; Johnson vs. Weatherwax, 9 Kan. 75. When the names of the co-o'nli- SUEETYSHIP DEFENSES. 161 If the promisor delivers to the principal the obligation in til incomplete form, with authority to him to complete the in- strument, he will be bound, even though the blanks are not filled in accordance with his directions.^"* In the absence of express authority it is held that the doc- trine of implied agency does not reach the amount of the pen- idty in the bond, and such blanks being filled by the principal, ■will not bind the surety. ^"^ gora appear in the body of the bond, but not as signers, but the bond was delivered without any condition that the others would sign. Held, not a, defense. 166 Butler vs. United States, 21 Wall. 272; White vs. Duggan, 140 Mass. 18; 2 Atl. 110; Lee Co. vs. Welsing, 70 la. 198; 30 N. W. 481; ' Rose vs. Douglass Twp. 52 Kas. 451 ; 34 Pac. 1046; Greene Co. vs. Wil- hite, 29 Mo. App. 459; South Ber- wick vs. Huntress, 53 Me. 89; Wes- sell vs. Glenn, 108 Pa. 104. PuUerton vs. Sturges, 4 O. S. 529, Ranney, J. : " No rule is bet- ter settled, or founded upon stronger reasons, than that which affirms the liability of one intrusting his name in blank to another^ to the full extent to which such other may see fit to bind him, when the paper is taken in good faith and without notice, actual or implied, that the authority given has been exceeded, or the confidence reposed has been abused. It has the effect of a general letter of credit; and the rule is foundedi not only upon the principle of general juris- prudence which casts the loss, when one of two equally innocent persons must suffer, upon him who has put it in the power of another to do the injury, but also upon that rule of the law of agency, which makes the principal liable for the acts of his agent, notwithstanding his private instructions have been disregarded, when he has held the agent out as possessing a more enlarged author- ity. These rules are indispensably necessary to prevent fraud and sur- prise upon third persons, and in their application to the usual course of dealing in commercial transac- tions, are to be considered as of vital importance." The earlier cases in Ohio held that instruments under seal, delivered in an incomplete form, could not be completed except in pursuance of a written authority, also under seal. Ayres vs. Harness, 1 0. 368; State vs. Boring, 15 0. 507. But private seals were abolished in Ohio in 1884. See also Penn vs. Hamlett, 27 Gratt. 337; Cross vs. State Bank, 5 Ark. 525. 167 Famulener vs. Anderson, 15 0. S. 473; Ehea vs. Gibson, 10 Gratt. 215. A fortiori when filled by the creditor. Spring Garden Ins. Co. vs. Lemmon, 117 Iowa 691 ; 86 N. W. 35. See also Preston vs. Hull, 23 Gratt. 600, where the same rule was applied, where a blank for the name of the obligee was filled by the prin- cipal. lt)2 THE LAW OF SDEETYSHIP. §110. Suretyship contracts made in reliance upon promises of the creditor. Fraud cannot be predicated upon a misrepresentation of things not in existence ; only present or past transactions can be the subject of fraudulent misrepresentation. A promise or stipulation by the creditor that certain things will be done by himself or others, or that certain facts will exist, where the doing of these things is not made a condition of the contract, can not be set up as a basis of defense by the Surety or Guar- .•vntor, even though the contract is made in reliance upon the piomise or stipulation. In a legal sense, it ' i not fraudulent to promise to do a thing, even without any intent of fulfilling the promise."' A promise, however, to do a thing, or that certain facts will exist in the future, may be fraudulent, if the happening of such event is known to the party promising as being impossible, or where from his position, or opportunities for information, he is presimied to know what he promises cannot take place. Such misrepresentation altbougl^ relating to future events will amount to deceit, and vdll be actionable as a basis for rescission of contract."" The same rule applies to suretyship contracts. Where the creditor represented that the accounts of the principal would be audited every two weeks, and the surety signed the bond in reliance that h^ would have the benefit of 168 People vs. Healy, 128 111. 9; ture earnings of a corporation anil 20 N. E. 692; Kitaon vs. Farwell, made by a person having superior 132 111. 327; 23 N. E. 1024; Cassel- knowledge of the earning power of berry vs. Warren, 40 III. App. 626 ; the corporation ; such representation Gallager vs. Brunei, 6 Cowen 346; not being true was held to amount Sheldon vs. Davidson, 85 Wis. 138; to actionable deceit. See also Fidel- 55 N. W. 161 ; Warner vs. Benjamin, ity & Deposit Co. vs. Moshier, 151 89 Wis. 290; 62 N. W. 179; Mooney F. 806. vs. Miller, 102 Mass. 217; Dawe vs. It is by application of this rule Morris, 149 Mass. 188; 21 Atl. 313; that a purchase of merchandise is Robertson vs. Parks, 76 Md. 118; ^^^^ *« ^^ constructively fraudulent 24 Atlr 411; New Brunswick Land '^ t^e vendee has no reasonable ex- Co. vs. Conybeare, 9 H. L. 711. pectation of being able to pay for 109 French vs. Ryan, 104 Mich. ^^^ merchandise at maturity. Tal- 625; 62 N. W. 1016. In this case '^o" ^=- Henderson, 31 0. S. 162; the representation was as to the fu- ^"^"^'l ''^^ Bradlee, 9 Gill. & Johns. (Md.) 220. SURETYSHIP DEFENSES. 163 this safeguard, it was held not to be a defense that the creditor failed to do as stipulated.^'" Also the same rule was applied in a case where a retiring partner promised his guarantor against the firm debts, that he would not resume business. The guarantor who had been in- duced by this promise to enter into the undertaking was held liable, notwithstanding the retiring partner violated his agree- ment."' §111. Conditional contracts of suretyship — Parol evidence not competent to show conditions. A surety or g-uarantor will not be bound if the contract con- tains conditions which are not complied with. The common examples in which this rule is applied, are those cases in which notice of default, or demand upon the principal is stipulated,^'" or the guaranty is one of collectibility, involving by necessary implication the condition of due diligence.^" The promisor is entitled to stand upon the exact terms of his bargain, even though he may suffer no damage from the breach of it. Such defense can not, however, be maintained unless the con- dition is expressed or necessarily implied from the writing as a part of the oontract itself. This is the direct result of the Statute of Frauds, requiring the promise to be in writing, as well as the established rule of written contracts, that conditions cannot be imposed by parol. But distinction must be made between conditions precedent and conditions subsequent ; it is the latter which must be written iTo Benham vs. Assurance Co., 7 if, at the time tKey were made, it Welsh. H. & G. 744; Towle vs. Nat. was not intended to comply with Guardian Assurance Society, 3 Giff. them, it was but an unexecuted in- 42. tention, which has never been held, I'l Gage vs. Lewis, 68 III. 604, of itself, to constitute fraud. If Schoefield, J. : " It can not be said they legally amount to anything, that these representations and prom- they constitute a contract." ises were false when made, for until See also Municipal Council vs. the proper time arrived, and plain- Peters, 9 Up. Can. (C. P.) 205. tiflF refused to comply with them, it "^ Ante Sec. 68. could not positively be known that "^ Ante Sec. 62i they would not be performed. Even 164 THE LAW OF SUEETYSHIP. in the contract. If the condition is that the contract is not to be delivered or take eifect except upon the happening of a cer- tain event, such as, for example^ that it is not to be delivered or not to take effect unless another signs as co-surety ; such condi- tion may be shown by parol, and knowledge of this condition on the part of the creditor being established, the surety will not be held unless the co-surety signs.^'* If the condition relates to the performance of the contract, and operates to prevent the enforcement after the rights of the parties have vested, as distinguished from conditions which pre- vent either party from becoming bound in the first instance, the Statute of Frauds, as well as the ordinary rules of evidence relating to written instruments, will exclude parol proof in establishing such conditions. A surety or guarantor cannot show by parol that the liability assumed was not to be enforced imless a certain contingency should arise. ^'° iTiFertig vs. Bucher, 3 Pa. 308; Campbell Print. Press Co. vs. Pow- ell, 78 Tex. 53 ; 14 S. W. 245 ; Smith vs. Kirkland, 81 Ala. 345; 1 South. 276; Cowan vs. Baird, 77 N. C. 201; Read vs. MeLemore, 34 Miss. 110; Goflf vs. Bankston, 35 Miss. 518; State Bank vs. Burton-Gardner Co., 14 Utah 420; 48 Pac. 402; Bivins vs. Helsley, 4 Met. (Ky.) 78; Cor- poration of Huron vs. Armstrong, 27 Up. Can. (Q. B.) 533; Evans vs. Bremridge, 8 DeG. M. & G. 100. The theory of this class of eases is that such delivery to the principal by the surety, or by the principal to the creditor, coupled with a con- dition, creates an escrow, and no liability attaches till the terms (jf the escrow are met. It seems, how- ever, that some eases hold that an escrow can not be created by a delivery to the obligee, and that con- ditions made with the obligee can not be shown by parol. Moss vs. Riddle, 5 Cranch 351; Murphy vs. Hubble, 2 Duv. (Ky.) 247. It is held that if the delivery is made to the obligee by a stranger, the obligee is bound to inquire whether any conditions were at- tached to the delivery, and fail- ing to do so, will be bound by the condition, although hav- ing no actual knowledge of it. State vs. Peek, 53 Me. 284; Smith vs. Moberly, 10 B. Mon. (Ky.) 266 Deardorflf vs. Foresman, 24 Ind. 481 Nash vs. Fugate, 24 Gratt. 202 Passumpsic Bank vs. Goss, 31 Vt. 315. Also, if the bond is delivered to the obligee in an incomplete form, such as containing in the body of the bond, names the co-sureties who do not appear as signers, the obligee is chargeable with constructive no- tice of the condition that co-sureties were to sign. Ante Sec. 109. I'B Miller vs. Ridgely, 22 Fed, SURETYSHIP DEFENSES. 165 Conditions imposed by law need not be set out in the con- tract; thus where the law provides that no action shall be brought upon the bond of a public officer, unless an order of court has been entered directing the officer to pay ; such condi- tion may be pleaded as a bar, without being stipulated in the contract.^" If the law supplies the condition that more than one surety shall sign, a sole surety should not be held. He should be per- mitted, without risk to himself, to rely upon public officers per- forming their full duty, in not accepting bonds except in con- formity to law.^^' It has sometimes been considered that the requirement of statute for more than one suretj' is a provision wholly for the benefit of the public, and that tJie beneficiary, acting through the proper public officer, may waive such benefit without in- validating tlie bond."^ This view, however, overlooks a valuable right of the surety, who might not have signed except with the expectation that the risk would be divided witli another, and furthermore, public ministerial officers are not given, in this country, the power of suspending the operation of statutes. There is, however, undoubted authority for the rule, that a surety may waive the requirement of statute for more than one surety and bind himself in an undertaking required by statute without complying with its terms. But such exception rests wholly upon the Surety's eonsent.^^° Eep. 889. Where the surety signed I'^Toles vs. Adee, 84 N. Y. 223. with the understanding that he The bond in this ease was given for should not be called upon for pay- $2,000, and with one' surety. The ment, except in the event of the Statute required a bond for $1,000 death of the principal. See also and two sureties. The surety signed Bank vs. Eichmond, 23.) ilo. 532; with knowledge that the require- 130 S. W. 352. nients of the Statute were not to be "G State vs. Dent, 121 llo. 162; complied with, and consented that 25 S. W. 924. the bond should be delivered with- 177 Sharp vs. U. S., 4 Watts (Pa.) out complying with the Statute. 21- Held, Andrews, J. : " The evidence See also Cook vs. Freudenthal, 80 shows that the sheriff declined at X. Y. 205, where the Statute as to first to take the undertaking in ques- the form of the bond was not com- tion, doubting his authority to do plied with. "8 state vs. Benton, 48 N. H. 651. 166 THE LAW OF SUEETYSHIP. §112. Same subject — Parol evidence competent in certain cases. Where the defense of the surety or guarantor is the failure of consideration, the circumstances which disclose the considera- tion and the fact of its non-performance, may be shown by parol, although in many cases the agreement might be classed, without close discrimination, as a mere conditional contract. In England, and for the most part in this country, the Statute of Frauds is either modified by amendment or judicial con- struction, so that the consideration of a suretyship contract need not now be expressed in writing ^'° and the ordinary rules of construction, as applied to written instruments, do not make the consideration a condition of a contract, but rather one of the constituent elements, and if omitted from the writing it may be supplied by parol, for the purpose of disclosing the full agree- ment of the parties, but not to modify or impose conditions upon that agreement. Language reciting the consideration is not contractual. A consideration is not necessarily a part of the promise of either party, but is the inducement of the promise.^^^ Thus a surety upon a note is induced to make a contract by the promise of the creditor to secure his release upon another note for which he is surety. Such promise by the creditor is not a condition and need not be expressed in writing; it is the consideration of the contract and may be shown by parol.^^" so. He did not take it in his official i8o Ante Sec. 26, 27. authority. He simply, as the trans- isi Where there is a promise ex- action is proved, consented at the pressed in the written contract to solicitation of A, to act as the inter- pay the consideration, or perform mediary to ascertain whether the some duty constituting the consid- plaintiflF's attorney would accept the eration, the language reciting the undertaking, and discharge him from consideration becomes contractual arrest. When the plaintiff's attor- and cannot be modified by parol. ney consented to the proposition and Stewart vs. Chicago Ry. Co., 141 accepted the undertaking, it became Ind. 5.'5; 40 N. E. 67. operative and binding, not as a stat- i82 Campbell vs. Gates, 17 Ind. utory obligation, but as a common 126. law agreement between the parties. See also Port vs. Bobbins, 35 la. for the breach of which an action 208. would lie as upon any other assump- tit." SUKETYSHIP DEI-ENSES. 167 Where the inducement to the suretyship was that the cred- itor would dismiss a proceeding in bankruptcy against the prin- cipal, and such proceeding was not dismissed," it was held to be a failure of consideration.^^^ A general promise of forbearance to sue the principal may be shown by parol to constitute the " condition " or terms under which the surety signed, and a failure to comply with these terms, will be ground of his discharge/^* Perol proof will be received in most jurisdictions in this country, for the purpose of establishing the particular kind of suretyship contract made upon negotiable instruments. An accommodation indorsement in blank, may be shown to be the contract of an indorser, as distinguished from a surety or guarantor, and the fact that this results in a liability con- ditioned upon demand and notice, is held not to be a variation of a writing by parol, although such evidence establishes con- ditions not appearing in the written contract, but merely the completion of a writing expressed in blank, by making definite and certain what was before indefinite and ambiguous ; and for the same reasons, the creditor may show by parol, that the promisor signed as Surety, and therefore not entitled to the privileges of notice.'*^ Parol evidence will also be received to show that one of sev- 183 Paton vs. Stewart, 78 111. 481. the ordinary contract of the Indors- 184 Wallace vs. Hudson, 37 Tex. er, has been held to restrict, in that 456. State, parol evidence from being re- 185 Rey vs. Simpson, 22 How. 341 ; ceived to establish any other con- Good vs. Martin, 95 U. S. 90 ; Green- tract. Spencer vs. Allerton, 60 ough vs. Smead, 3 0. S. 416; Sey- Conn. 410; 22 Atl. 778. mour vs. Mickey, 15 0. S. 515; Ful- A similar Statute in Pennsylva- lerton vs. Hill, 48 Kan. 558 ; 29 Pac. nia, leaves the promisor conclusive- 583; Brovpning et al. vs. Merritt et ly established as a second Indorser, al., 61 Ind. 425; Kealing vs. Van- while in New York the use of parol sickle, 74 Ind. 529 ; Cole vs. Smith, evidence is limited to proof, which 29 La. Ann. 551. shifts the contract from that of see- In Connecticut a statute providing ond. Indorser to first Indorser. that a blank indorsement Imports Ante, Sec. 8. 168 THE LAW OF STJEETYSHIP, eral obligors is a surety or guarantor, although he appears prinfe facie as maker. ''° §113. Release of promisor by the creditor. While a promisor can not show by parol that the creditor agreed that the liability would be enforced only upon the hap- pening of a certain contingency ^" or which is the same thing, that the surety or guarantor would be released if certain events took place, yet, it is competent to show by parol or otherwise, that subsequent to the making of the suretyship contract, the creditor, either by his words or by his conduct, exonerated the promisor, although the written contract is not surrendered or cancelled. Thus where the creditor tells the promisor that the debt is paid when it is not, or tells him that he will look to the principal alone and will not call upon the promisor in any event ; this rests upon the ground that a party may at any time waive the benefits of a contract, and be bound by the waiver, and also upon the further reason that a creditor will be estopped from enforcing the suretyship contract, if he has once declared to the promisor that such contract is at an end, since the prom- isor, in reliance upon the declaration, might at once surrender securities held as indemnity or omit such further oversight of the debtor's affairs as would be necessary'to his protection, if the suretyship was to subsist. It may be doubted whether it is equitable that a promisor should be discharged in toto merely because he has been exposed 180 Hubbard vs. Gurney, 64 N. Y. The fact that the obligation is 457; Davies vs. Barrington, 30 N. under seal does not appear to have H. 517; Mechanics Bank vs. Wright, affected the decision of the question 53 Mo. 153 ; American Invest. Co. vs. as to whether parol proof will be Marquam, 62 Fed. Rep. 960; Otis received to shift the position of one vs. Von Storch, 15 R. I. 41; 23 Atl. who is apparently maker to that of 39; First Nat'l Bank vs. Gaines, 87 promisor in suretyship. Rogers vs. Ky. 597 ; 9 S. W. 396 ; O'Howell vs. School Trustees, 46 111. 428 ; Fowler Kirk, 41 Mo. App. 523. vs. Alexander, 1 Heisk. (Tenn.) 425; Contra — Shriver vs. Lovejoy, 32 Cole vs. Fox, 83 N. C. 463 ; Metzn«r Cal. 574; Stroop vs. McKenzie, 38 vs. Baldwin, 11 Minn. 150. Tex. 132; Coots vs. Farnsworth, 61 ist Ante Sec. 111. Mich. 497; 28 N. W. 534. STJEETTSHlP DEFENSES. 169 to a risk, without a showing that he has been damaged, but such appears to be the holding of some courts of high authority.^'* Other cases, however, are based upon the fact that the prom- isor has changed his position, either by releasing securities held for his indemnity, or has been deprived of opportunities for protecting himself. Such views can be fully justified in prin- ciple."" A very learned judge has said : " We consider it well settled by numerous authorities, that when a creditor who knows that one debtor is a surety, gives him notice that the debt is paid by the principal, and such debtor, in consequence, changes his situa- tion, as by surrendering security, or forbearing to obtain secur- ity when he might, or otherwise suffers loss by it, he is dis' charged. And although the debt has not been paid, and such notice was given by mistake, and without any fraudulent design, it is a mistake made at his own peril, and he shall ratier bear the loss, than throw it upon on© who has been misled by it." "° A mere expression of opinion that the principal will pay and that the surety will probably not be called upon, will not re- lease the surety. ^°^ 188 Harris vs. Brooks, 21 Pick. West vs. Brison, 99 Mo. 684; 13 S. 195. The basis of the holding in W. 95; Thornburgh vs. Madren, 33 this case was a. verbal statement by la. 380; Auchampaugh vs. Schmidt, the creditor to the surety, that he 80 la. 186; 45 N. W. 567; Baker vs. would look to the principal for pay- Briggs, 8 Pick. 123; National Bank ment, and that the surety need not of Commerce vs. Gilvin, 152 S. W. trouble himself about it. This was 652; Wilkins v. Hanson, 110 Minn, considered as an exoneration of the 399; 138 N. W. 418. surety, without regard to any ques- The promisor is discharged only to tion of injury to him. the extent he was damaged. McAl- See also Whitaker vs. Kirby, 54 lister vs. Pitts, 58 Neb. 424; 78 N. Ga. 277. It seems, however, that W. 711. this ease is based largely, if not al- i^o Shaw, C. J., in Carpenter vs. together, on the language of the King, 9 Met. 511. code, providing that a surety may isi Howe Mach. Co. vs. Farring- be discharged by any act of the cred- ton, 82 N. Y. 121 ; Brubaker vs. Oke- itor which "exposes him to greater son, 36 Pa. 519, Strong, J.: "It liability or increases his risk." Wil- never yet has been held, that a kinson v. Conley, 133 Ga. 518; 66 declaration of the creditor that the S. E. 372. principal debtor was good enough. Contra — Michigan State Ins. Co. that the surety was in no danger, vs. Soule, 51 Mich. 312; 16 N. W. and that the debt would be collected 662. , from the principal, without more 188 Bank vs. Haskell, 51 N. H. was sufficient to estop the creditor 116; Brooking vs. Bank, 83 Ky. 431; from proceeding against the surety. 170 THE LAW OF SUEETTSHIP. §114. Belease of a co-promisor by the creditor. The relation of co-sureties or co-guarantors to each other, imposes a limitation upon the contract of the creditor, founded upon the equities which each promisor has to require contribu- tion from his co-obligors in suretyship. One of the inherent equities growing out of the suretyship relation, is the application of the maxim " Equality is equity," ^'^ whereby several pessons being bound for the same thing, may, without any express contract covering their rights in this respect, require that the burden of the undertaking be shared equally. Such is the basis of the doctrine of contribu- tion in suretyship.^'^ It is manifest that equality cannot be insured if the creditor is permitted at will to release one or more of the co-promisors from their share of the burden of the joint undertaking. Different views have been held as to the extent to which relief should be granted to the remaining promisor, when his co-prom- isor has been discharged by the creditor. The most generally accepted rule is that the remaining prom- isor will be discharged, in equity, and generally also at law, to the extent that he has been deprived of his right of contribu- tion against his co-promisor, but that the act of the creditor cannot be turned to the further advantage of the remaining promisor by releasing him altogether ; the result being merely, that he shall not be called upon to bear additional burdens on account of the discharge of others.^"* Such deelaratians are exceedingly ^^^ Bracton Lib. 1 Cap. 3, Sec. 20. common. They are often made to I's Post Chapter 10. induce the surety to gb into the con- i»* Morgan vs. Smith, 70 N. Y. tract, and they are repeated after- 537; Lewis vs. Armstrong, 80 Ga. wards, without any design to mis- 402; 7 S. E. 114; Thomason vs. lead, or without being understood as Clark, 31 111. App. 404; Waggener a waiver of any rights. They are vs. Dyer, 11 Leigh (Va.) 384; Jemi- made and received as expressions of son vs. Governor, 47 Ala. 390; Rice opinion. They never invite confi- va. Morton, 19 Mo. 263; .Gordon vs. dcnce, nor is confidence often re- Moore, 44 Ark. 349 ; Smith vs. State, posed in them. Standing alone, they 46 Md. 617; Robinson, J.: "It will not discharge the surety." seems also to be well settled that the Michigan State Ins. Co. vs. Soule, release of one or more sureties with- 51 Mich. 312; 16 N. W. 662. See out the assent of the co-sureties will also Baldwin vs. Daly, 41 Wash. operate of law to discharge the lat- 416; 83 Pac. 724. ter, because it ie a cardinal principle SUEETYSHIP DEFENSES. 171 This rule will be applied whether the discharge of the co- promisor is by the voluntary act of the creditor, or is the result of the operation of law; as for example, where the co-surety requested a creditor to bring an action against the principal, and was disohai'ged by failure of the creditor to institute the action as requested. The remaining surety was held to be dis- charged as to the contributory share of the co-surety thus re- leased."^ Such discharge of one of several co-promisors by operation of law, will not release the remaining promisor, unless resulting from the fault or procurement of the creditor. A discharge of of suretyship that the surety has the right to stand by the very terms of the contract, and the creditor will not be permitted to change or alter the contract without concurrence of all the parties to it. "In equity, however, the rule is different, and the release of one or more sureties will not be construed to have this effect, unless it sub- jects the co-sureties to an increased risk or liability "It is difficult to imagine on what principle it can be maintained in equity, that the mere release of one surety discharges the other sureties from liability. "As between themselves, the sure- ties are liable only for their propor- tion of the debt, and the right of contribution does not exist unless they have paid an amount exceeding this proportion. "If, then, the release of one surety discharges the others from the pay- ment of the proportion of the debt, which such surety ought to have contributed, and discharges them also from the proportion which he ought to bear in the loss arising from the insolvency of any of the other sureties, it is clear that such release can in no manner prejudice or subject the eo-sureties to an in- creased risk." Ex parte Gifford, 6 Ves. 805; Hodgson vs. Hodgson, 2 Keen 704. In Cass County vs. American Ex- change Bank, 11 N. D. 238j 91 N. W. 59, a surety was wholly dis- charged where the name of one of five sureties who had signed a bond was erased after the defendant sure- ty had signed. See also Hilliboe vs. Warner, 118 N. W. 1047; 17 N. D. 594. The rule stated in the text rests upon the assumption that the release of one co-surety, deprives the remaining promisor of the right of contribution against him. But at least one Court of high repute is re- ported as holding that the remain- ing promisor may have contribution from the one who has been released by the creditor. Clapp vs. Rice, IS Gray 557, 3oar, J.: "It is very clear that co-sureties are liable to contribution among themselves; and that the discharge of one of them from his principal obligation, if the others are not discharged, will not release him from the liability to contribute for their indemnity." iLane vs. Moon, 103 S. W. 211. 105 Klingensmith vs. Klingen- smith, 31 Pa. 460; Trustees vs. Southard, 31 111. App. 359; Gordon vs. Moore, 44 Ark. 349, 358. See also Hallock vs. Yankey, 102 Wis. 411; 78 N. W. 156. But see Wright vs. Stockton, 5 Leigh (Va.) 153; Towns vs. Riddle, 2 Ala. 694. Holding that the fail- ure to bring suit when, requested by one surety, discharges both sureties. ■- 172 THE LAW OF SUEETYSHIP. a co-surety in bankruptxjy, leaves the remaining surety liable for the full amount/^^ Again, \ke release by the creditor of a levy made upon the propesrty of one of several sureties, is held to discharge the co- sureties to the extent of the contributory share of the surely whose property was released. '^'^ The extension of time to one of several sureties, would seem to involve precisely the same question of a discharge of the co- surety, to the extent of the contributory share of the surety whose obligation is extended, as it deprives the remaining surety of the privilege of having immediate contribution at maturity, if he pays the debt/'* The release of one of several eo-promisors, reserving all rights against the remaining promisors, is not vnthin the oper- ation of the rule, since the right of contribution is still pre- served, inasmuch as the reservation in the contract of release i8« Sacramento Co. ts. Bird, 31 Cal. 66. Sec. 16, of the National Bank- ruptcy Act, 1898, provides that the liability of one who is a co-debtor with the Bankrupt, shall not be al- tered by the discharge of the Bank- rupt. Release of a co-surety by plea of coverture does not affect liability of other sureties. Warren vs. Louis- ville Tobacco Exch. 55 S. W. 912. 19'Dodd vs. Winn, 27 Mo. 501. The co-surety was discharged in this case to the extent of the pro-rata share of tlie surety whose property was released, and apparently with- out regard to the fact that the re- lease of the levy restored the judg- ment, so that the co-surety paying the debt, might have enforced con- tribution, inasmuch as an abandon- ment of a, levy restores the judg- ment, which has been conditionally satisfied by the levy, leaving in force the liability as if no levy had been made. Green vs. Burke, 23 Wend. 490; Bole vs. Bogardis, 86 Pa. 37; McKeeby vs. Webster, 170 Pa. 624; 32 Atl. 1096. The rule that a release of a levy upon property of the principal dis- charges the surety, furnishes a re- mote analogy for the application of the same rule where the levy is upon the property of a co-surety, but the principles involved are not parallel. See also Lower vs. Buchanan Bank, 78 Mo. 67; English vs. Sei- bert, 49 Mo. App. 563. Contra — Starry vs. Johnson, 32 Ind. 438 ; Chipman vs. Todd, 60 Me. 282; Alexander vs. Byrd, 85 Va. 690; 8 S. E. 577. ' But see People vs. Chisholm, 8 Cal. 29, holding that the release of a levy upon property of a surety, dis- charges the co-surety to the extent of the value of the property released from levy. ■ 198 ide vs. Churchill, 14 0. S. 372; Gosserand vs. Lacour, 8 La. Ann. 75. Contra — ^Draper vs. Weld, 13 Gray 580; Sherman County vs. Nichols, 65 Neb. 250; 91 N. W. 198. SURETYSHIP DEFENSES. 173 is considered as notice to the party released that his liability in contribution is to continue, and his acceptance of this arrange- ment, implies his assent to remain bound in contribution/"" Some courts have maintained the view that the release of one co-surety, discharges the other altogether, on the ground that a surety has the right to stand upon the precise terms of his contract, and that the discharge of one places him in new relations, and is a variation of his contract.^"" Statutory provisions in some States have been enacted which enable the creditor to release one of several co-promisors, with- out discharging the remaining promisors, except afe to the con- tributory share of the one released.^"^ §115. Defense of the promisor based upon the failure of the creditor to sue the principal when requested. (^ There is no justification in principle in favor of a defense to a promisor, at common law, based upon the failure of the cred- itor to sue the debtor upon a liquidated claim, when requested by a surety or guarantor. The creditor is not held responsible for any delay or negli- gence in pursuing his remedies against the principal except where a duty of diligence in this respect is imposed upon him 199 Hood vs. Hayward, 124 N. Y. Collins vs. Prosser, 1 Barn. & Cr. 1 ; 26 N. E. 331 ; Glasscock vs. Ham- 682. ilton, 62 Tex. 143; Thompson vs. See also Smith vs. State, 46 Md. Lack, 3 C. B. E. 540; Kearsley vs. 617. Where the complete discharge Cole, 16 M. & W. 128; Price vs. of the remaining surety is conceded Barker, 4 El. & Bl. 760; McDonald to be the rule at law but not in vs. Whitfield, 27 Can. (S. C.) 94. equity, and the release in equity is 200 People vs. Buster, 11 Cal. 215; held to be pro tanto. Spencer vs. Houghton, 68 Cal. 82; To the same effect. State vs. Mat- 8 Pae. 679; Stockton vs. Stockton, son, 44 Mo. 305; Massey vs. BrowB, 40 Ind. 225; Seligman vs. Gray, 66 4 S. C. 85. Mich. 341; 33 N. W. 510; Clark vs. 201 Alford vs. Baxter, 36 Vt. 158; Mallory, 185 111. 227; 56 N.E. 1099; State vs. Atherton, 40 Mo. 209; Price vs. Barker, 4 El. & Bl. 670; Walsh vs. Miller, 51 0. S. 462; 38 X. E. 381; Halloek vs. Yankey, 102 Wis. 41; 78 N. W. 156. 174 THE LAW OF SURETYSHIP. by his contract or by statute/"^ and no additional equity in favor of tbe promisor arises from the fact that a request is made of the creditor to do that which it is conceded he was not bound to do of his own accord. By the exercise of diligence, the promisor can have full pro- tection by paying the debt himself at maturity, and bringing his own action against the debtor, or by bringing a proceeding in equity against the principal to compel him to pay the cred- itor,'''" and he should not be permitted by a mere," request " to shift upon the creditor the burden of a greater degree of dili- gence than he himself is willing to exercise in his own behalf. Such is the holding of the great preponderance of authority in this country.""* 202 Ante Sec. 95. 203 Moore vs. Toplifif, 107 111. 241 ; Philadelphia & Reading Ky. vs. Lit- tle, 41 N. J. Eq. 519; 7 Atl. 356; Miller vs. Stout, 5 Del. Ch. 259; West vs. Chasten, 12 Fla. 315; Bish- op vs. Day, 13 Vt. 81; Woolridge vs. Norris, L. R., 6 Eq. Cases 410, Qiffard, V. G. (quoting Lord Redes- dale) : "A Court of Equity will also prevent injury in some cases by interposing before any actual in- jury has been suifered; by a bill which has been sometimes called a bill quai timet, in analogy to pro- ceedings at the common law, where in some cases a writ may be main- tained before any molestation, dis- tress, or impleading. Thus, a, sure- ty may file a bill to compel the debtor on a bond in which he has joined to pay the debt when due, whether the surety has been actual- ly sued for it or not." See also Washington vs. Tait, 3 Humph. (Tenn. ) 543; Richards vs. Osceola Bank, 79 la. 707 ; 45 N. W. 294 ; Womack vs. Paxton, 84 Va. 9 ; 5 S. E. 550 ; Ardeseo Oil Co. vs. No. Amer. Oil Co., 66 Pa. 375. Sharswood, J. : " It is well set- tled that as soon as a surety's obli. gation to pay becomes absolute he ia entitled in equity to require the principal debtor to exonerate him, and he may at once file a bill to compel an exoneration, although the creditor has not demanded payment from him." 204 Bellows vs. Lovell, 5 Pick. 307 ; Dane vs. Cordnan, 24 Cal. 157 ; Bull vs. Allen, 19 Conn. 101; Ingels vs. Sutliflf, 36 Kan. 444; 13 Pae. 828; Eaton vs. Waite, 66 Me. 221; Gray vs. Farmers Bank, 81 Md. 631; 32 Atl. 518; Inkster vs. First Bank, 30 Mich. 143 ; Smith vs. Frey- ler, 4 Mont. 489; 1 Pac. 214; Quil- len vs. Quigley, 14 Nsv. 215; Harris vs. Newell, 42 Wis. 687; Wilds vs. Attix, 4 Del. Ch. 253; Louisiana Bank vs. Ledoux, 3 La. Ann. 674; Thompson vs. Bowne, 39 N. J. Law 2; First Bank vs. Homesly, 99 N. C. 531 ; 6 S. E. 797 ; Snow vs. Hor- gan, 18 R. I. 289; 27 Atl. 338; Ben- edict vs. Olson, 37 Minn. 431; 35 N. W. 10; Morrison vs. Citizens Nat'l Bank, 65 N. H. 253; 20 Atl. 300. Carpenter, J.: "As between creditor and surety, it is the surety's business to see that the principal SUBETYSHIP DEFENSES. 175 Statutes in a number of States provide for tbe giving of notice by the promisor to the creditor to sue the principal, and for the discharge of the promisor if the notice is not complied with. Tbe general trend of these statutes is the same, and they usu- ally provide for a notice in vsriting, and where such statutory rule is in force, the creditor cannot omit to bring his action without losing his right against the promisor, even though the surety or guarantor suffers no loss on account of the failure of the creditor to comply with the notice.^"" pay3. The creditor's chief purpose in requiring a surety is to avoid the necessity of resorting to legal remedies against the principal, to escape the vexation and expense of litigation, and cast the burden upon another. The surety's contract is, tliat he will himself pay the note when it falls due, and not that he 'Vvill pay it in case the payee or bolder cannot by due diligence en- force payment by the principal. If he performs his contract, the cred- itor has neither cause nor opportu- nity to institute legal proceedings." See Contra Cases cited in Post Sec. 116: 205 The Statute in Ohio is as follows : Sec. 5833. — "A person bound as surety in a written instrument for the payment of money, or other val- uable thing, may, if a right of action accrue thereon, require his creditor, by notice in writing, to commence an action on such instrument forth- with, against the principal debtor; and unless the creditor commence such action within a reasonable time thereafter, and proceed with due diligence, in the ordinary course of law, to recover judgment against the principal debtor for the money or other valuable thing due thereby, and to make, by execution, the amount thereof, the creditor, or the assignee of such instrument, so fail- ing to comply with the requisition of such surety, shall thereby forfeit the right which he would otherwise have to demand and receive of such surety the amount due thereon." It is held that no particular form of words is required under this Statute, and that a notice which substantially complies with the pro- visions of the Act is sufficient. Clark vs. Osborn, 41 0. S. 28; Iliff vs. Weymouth, 40 0. S. 101; Ala- bama National Bank vs. Hunt, 12.5 Ala. 512; 28 So. 488. But where the creditor is a married woman, a notice by a surety direct to and served upon her husband, demanding that he bring suit forthwith, is in- sufficient, although such notice be. communicated and exhibited by the husband to his wife. Moorman vs. Voss, 83 N. E. 76; 77 Ohio 270. See also for construction of simi- lar Statutes in other States. Pick- ens vs. Yarborough, 26 Ala. 417 Darby vs. Berney Nat. Bank, 97 Ala 643; 11 South. SSI; Thompson vs. Eobinson, 34 Ark. 44; Bailey vs. New, 29 Ga. 214; Fish vs. Glover, 154 111. 86; Chrisman vs. Tuttle, 59 Ind. 155} Barnes vs. Mowry, 129 Ind. 56S; 28 N. E. 535; Shenandoah Bank vs. Ayres, 87 la. 526; 54 N. W. 367 ; Keirn vs. Andrews, 59 Miss. 39 ; Petty vs. Douglass, 76 Mo. 70 ; First Bank vs. Homesley, 99 N. C. 531; 6 S. E. 797; Thompson vs. Watson, 10 Yerg. (Tenn.) 362; Har- rison vs. Price, 25 Gratt. 553; Kit- tridge vs. Stegmier, 11 Wash. 3; 39 Pae. 242; Gillilan vs. Ludington, 6 W. Va. 128; Williams vs. Ogg & Keith Lumber Co., 42 Tex. Civ. App. 558; 94 S. W. 420; Edmonson vs. Pott's Admr., 68 S. E. 254; 111 Va. 79; Benge's Admr. vs. Eversole, 156 Ky. 131; 160 S. W. 911. It is held that the provisions of the Statute apply, although the 176 THE LAW OF SURETYSHIP. There are many holdings to the effect that the promisor in suretyship may maintain a bill in equity to compel the creditor to proceed against the principal/"" requiring before such rem- edy can be enforced, that the promisor first indemnify the cred- itor against the expense of the proceedings. There is a marked difference, however, in the attitude of a promisor who seeks by this means to accelerate the diligence of the creditor, and the case where he merely relies upon a re- q^uest made of the creditor, since in the latter he puts upon the creditor, the burden of all the risk, provided his action is fruit- less, and sets himself up as the Chancellor to determine the necessity for the application of such a remedy. It must be conceded, however, that the position taken in some cases, grant- ing jurisdiction in equity to a promisor to accelerate the dili- gence of the creditor, is not altogether consistent with the denial, by the same court, of a defense in equity, where the promisor suffers loss by the indifference of the creditor in not pursuing the debtor when requested. §116. Same subject — The doctrine of Pain vs. Packard. It has been held in the minority of the States that a moral and equitable duty rests upon the creditor to obtain payment if possible from the debtor, and not from one who is a, mere surety, creditor does not reside in the same ing the creditor to proceed against jurisdiction as the principal. Meri- the principal This is the deni Silver Plate Co. vs. Flory, 44 O. common course, where the surety S. 430; 7 N. E. 753. In this case seeks, by a bill agaimst the cred- the creditor vpas domiciled in Con- itor and the principal, to compel the necticut and the surety and princi- latter to exonerate the surety from pal in Ohio. But if the principal losses which may otherwise be sus- has left the state the obligee is not tained by him by the delays and for- obliged to follow him and sue him in bearance of the creditor in enforc- amother jurisdiction. Thompson vs. ing his debt." Thompson vs. Tay- Treller, 101 S. W. 174; 82 Ark. 247. lor, 72 N. Y. 32; Whitridge vs. In Richards vs. Bank, 81 O. iS. JJurkee, 2 Md. Ch. 442; Irick vs. 348; 90 N. E. 1000, it was held that Black, 17 X. J. Eq. 189; Reusch vs. this provision of the statute is not Keenan, 42 La. Ann. 419; 7 South, applicable to those parties who are ^SO. primarily liable under the negotiable Such remedy in equity is held to instruments act. „ ^ ^^ ^ , be merged in the Statute providing r, ^t''*o^r^°^\t ^- ^*- ^^° ""'■ for a requirement on the part of the Cobb, 200 Fed. 511. ,., ^, ,, • • . 206 In re Babcock, 3 Story 390, '^'3'^°' *° '"« ^^^ prmcipal upon — J.: "There is no doubt, that ?°^''t-r.. o^"x? ^'•,?,™"'°"'' a surety for a debt may in many ■'^"'^' ^^^' ^^ ■^- ^- 7*^- cases be entitled to relief by requir SURETYSHIP DEFENSES. 177 and if the creditxjr omits to do this, when notified by the' surety that a longer indulgence will expose him to hazard, and he actually suffers loss by the neglect of the creditor, he ought to be discharged. The case of Pain vs. Packard ^°^ decided in 'Eew York in 1816, is considered the parent case in the line of authorities maintaining this doctrine. This case has never been overruled by the New York courts, though it has frequently been criticised by the later deci- sions,^"* and has been modified by the restrictions placed upon its application to persons not in suretyship relations at the in- ception of the contract, but whose connection with the transac- tion is subsequent to the eixecution of the main contract, and who, though in the situation of a surety, such as an indorser in the chain of title, are not accommodation parties.^"' • Also the same modification is applied where the transaction is a sale of a chose in action, with a guaranty by the vendor ; '^^ 207 13 Johns. 174. The doctrine of Pain vs. Packard is adopted in the following cases: King vs. Baldwin, 17 Johns. 384; Manchester Co. vs. Sweeting, 10 Wend. 163 ; Eemsen vs. Beekman, 25 N. Y. 552 ; Black River Bank vs. Page, 44 N. Y. 453; Col- grove vs. Tallman, 67 N. Y. 95 Martin vs. Skehan, 2 Col. 614 Thompson vs. Robinson, 34 Ark. 44 Thompson vs. Watson, 10 Yerg. (Tenn.) 362. In the three cases last cited, the holding is that the Common Law Rule is in force, and that a verbal notice to the creditor is sufiBcient, notwithstanding the Statute provid- ing for the written notice. Dillon vs. Russell, 5 Neb. 484. In this ease the condition is imposed that the promisor must accompany his request with an oflFer to indem- »ify the creditor against the expense of his action. A request to be effective under the doctrine of Pain vs. Packard must not be made before maturity. Fid- ler vs. Hershey, 90 Pa. 363. It is held that the rule cannot be enlarged so as to require the cred- itor to procee'd against the debtor in any particular way, such as to fore- close a lien or to issue attachment. Haden vs. Brown, 18 Ala. 641; Rug- gles vs. Holden, 3 Wend. 216; First Bank vs. Wood, 71 N. Y. 405. 208 Warner vs. Beardsley, 8 Wend 198; Herriek vs. Borst, 4 Hill 650. 209 Trimble vs. Thome, 16 Johns, 152. 210 Wells vs. Mann, 45 N. Y. 327 " It is the right of a surety to pay the debt and prosecute the principal and one who for value transfers debt or security, and thereupon be comes guarantor or indorser, can protect himself against the conse quence of delay In enforcing the principal obligation and cannot, we think, by notice impose upon the 178 THE LAW OF SURETYSHIP. thus leaving the rule in force only as to cases in which the promisor contracts solely for the benefit and accommodation of the principal debtor ; from which it appears that the doctriae of Pain vs. Packard fills a smaller field, even in New York, than is sometimes claimed for it. §117. The principal's right of set-off or counterclaim against the creditor as a defense to the promisor. The legal right of set-off did not exist at common law, and the statutory authority upon which- it rests is limited to cases where cross-demands exist between the parties ; and if both demands are complete and mature and capable of liquidation, then in the furtherance of natural equity, legislative enactments permit one to be set off against the other when suit is brought, with « judgment fpr the balance against the one who owes the larger amount ; but statutory set-off must be between the same parties and in their own right. Again a counterclaim or recoupment of causes of action aris- ing out of the same transaction upon which the plaintiff's claim is based, will be allowed to the defendant in reduction of his liability when sued, but just as in the case of set-off, this cross- demand must be in the defendant's own right. The statutes creating these very useful and practical rules for doing justice, and the prevention of multiplicity of actions, gen- erally do not in terms include persons standing in the suretyship relation, where the cross-demand is between the principal and creditor. ^^^ But it is very clear, as a proposition of equity, that if the creditor is indebted to the principal, either upon a demand creditor or holder the duty of active tied to the benefit of the rule of Pain diligence at the risk of discharging vs. Packard. the surety by omitting it." New- 2" Sefton vs. Hargett, 113 Ind. comb vs. Hale, 90 N. Y. 326. 592; 15 N. E. 513. The Statute in But see Colgrove vs. Tallman, 67 Indiana gives to the Surety sued N. Y. 95, where one not orioinally alone the benefit of set-off in the bound as surety, but who was placed right of the principal, in the situation of a surety by sub- See also Edmunds vs. Harper, 31 sequent events, was considered enti- Grat. (Va. ) 637, construing similar Statute in Virginia. 8UBBTTSHIP DEFENSES. 179 ariBing out of the same transaction in -which another is surety, or upon a separate cause of action, that the right of the prin- cipal to have counterclaim or set-off should inure to the prom- isor in suretyship when sued by the creditor. The creditor should not be permitted to invoke a multiplicity of actions in adjusting his accounts vnth the principal, if by means of set-off or counterclaim, and without injustice to any of the parties involved, the same result could be reached with one action. If the creditor is insolvent, an additional and stronger equity exists in favor of preventing him from enforcing his demand against the surety or guarantor, except upon the condition of first deducting his debt to the principal. To permit a set-off or counterclaim in favor of the promisor in suretyship, in the right of the principal, involves, however, a practical difficulty, if the principal's claim against the cred- itor exceeds that of the promisor's liability. The latter cannot have a judgment for the balance in his ■favor, neither could the right of action for the balance be pre- served to the principal, without making divisible that which in its nature is entire, and exposing the creditor to a multiplicity of actions, if the claim of the principal against him should be divided. In those cases, therefore, in which the creditor does not elect to make the principal and promisor both parties to his suit, and where the procedure does not permit the promisor when sued alone, to bring in the principal as a party, on motion, the doctrine of equitable set-off or equitable counterclaim in favor of the promisor, and in the right of the principal, cannot dpply; at least not in those cases where the principal's claim against the creditor, exceeds that of the creditor against the promisor."^^ 212 Gillespie vs. Torrance, 25 N. fendant was an accommodation in- Y. 306. In this case there was a dorser. The Court said: "The breach of warranty, giving rise to a principal has a right of election claim for damages against the cred- whether the damages shall be claimed iter, and in favor of the principal, by way of recoupment in the suit upon a contract for which the de- on the note, or reserved for a crosB- 180 THE LAW OF SUBETYSHIP. For special equitable reasons, such as the insolvency of the creditor, it has been held that the cross-demands in favor of the principal may be adjudicated without having the principal before the court. ^^* The right to make the principal and promisor both parties to his action, whether the liability is joint or several, or to sue them separately at his option, is accorded to the creditor by statute in most of the States ; but these statutes do not generally furnish autliority to the promisor to require the creditor to exercise this option. ^^* At common law a joint action only could be brought to en- force a joint liability,^^^ so that the equitable rights of the prom- isor to have set-off or counterclaim in the right of the principal, can always be worked out where the liability is joint, and the common law requirement of joint actions has not been modified by statute, since the principal in such cases is necessarily a party. action. The defendant (Indorser) cannot make this election for him. If the defendant has a right to set up the counterclaim, amd have it allowed, in the action, it must bar any future action by the principal for the breach of warranty; and as no balance could be found in de- fendant's favor, he might thus bar a large claim in canceling a small one. If the right exists in this case, it would equally exist if the note was but $100 instead of $1,800. Supposing the other notes given for the timber to have been indorsed by different persons, for the accom- modation of the principal and all to remain unpaid, each of the indorsers would have the same right as the defendant. If they were to set up the same defense, how would the conflicting claims be reconciled?" Lasher vs. Williamson, 53 N. Y. 619; Newton vs. Lee, 139 N. Y. 332; Elliott vs. Brady, 192 X. Y. 221; 85 N. E. 69 ; 34 K. E. 905 ; Osborne vs. Bryce, 23 Fed. Rep. 171; Beard vs. Union Co., 71 Ala. 60; B. & 0. R. R. Co. vs. Bitner, 15 W. Va. 455 ; Thalheimer vs. Crow, 13 Ool. 39Y; 22 Pac. 779. Contra — Scroggin vs. Holland, 16 Mo. 419; Aultman vs. Hefner, 67- Tex. 54; 2 S. W. 861; Dechervaise vs. Lewis, L. R., 7 C. P. 372; Mur- phy vs. Glass, L. R., 2 P. C. 408; Alcoy Ry. vs. Greenhill, 41 London Solicitors Jour. 330. 2l3Jarratt vs. Martin, 70 N. C. 459; Scholze vs. Steiner, 100 Ala. 148; 14 Stouth. 552. Contra — Willoughby vs. Ball, 18 Okl. 535; 90 Pac. 1017. Where the maker is insolvent and the surety is sued alone, the court may require the maker to be brought in as a party defendant for purpose of adj'-idicating a counterclaim be- tween the creditor and the maker. Hines vs. Newton, 30 Wis. 640. 214 Vv^ilkins vs. Bank, 31 0. S. 565; Walsh Const. Co. vs. City of Cleveland, 250 Fed. 137. If Statu- tory authority does not exist, the principal and promisor can not be jointly sued by the creditor, except Tvhere the liability is joint. Abbott va. Brown, 131 Til. lOS; 22 K E. 813; Graham vs. Ringo, 67 Mo. 324; Tyler vs. Trustees, 14 Ore. 485; 13 Pac. 329; Virden vs. Ellsworth, 15 Ind. 144; Cross vs. Ballard, 46 Vt. 415. 215 Kautzman vs. Weirich, 26 O. S. 332. SUEETYSHIP DEFENSES. 181 Where all the parties are before the court, the right of equitable set-off or counterclaim in favor of the promisor, upon cross-demands between principal and creditor, is fully estab- lished in this country. ^^^ §118. Defenses based upon the right of the promisor to control the application of collateral. If the creditor holds collateral security belonging to the prin- cipal, and his contract with the principal is such that he is at liberty to apply the proceeds to any one of several debts owing by the principal, the surety or guarantor on one of these debts has no right to control the application so as to cause it to be applied in reduction of the particular debt for which he is liable.^" Unless restricted by a contract to the contrary, the creditor 2i«Mahurin vs. Pearson & Bel- lows, 8 N. H. 539, Parker, J.: "There are several considerations whicli show the propriety of allow- ing the set-off in this case. If the debt from the plaintiff to Pearson, which was offered in set-off, was contracted after that now in suit, it very probably might have been re- garded by the parties as in effect a payment thus far. It is at least but equitable that it should so oper- ate, whether contracted before or after. The rule in equity is, that if a creditor have security, the surety, on payment by him, is entitled to be substituted, ajnd to have the ben- efit of that security. "If, instead of having security, the creditor owes the principal part of the amount, and the principal is willing to put in a set-off, it is equally reasonable that the surety should have the benefit of the credit which the creditor has obtained 0(f the principal. And, moreover, it will tend to prevent multiplicity of actions; for, should the plaintiff col- lect his debt of Bellows, the latter must have aji action against Pear- son to recover the amount, and Pear- son will have a right of action on the claim now offered in set-off." Livingston vs. Marshall, 82 G-a. 281; 11 S. E. 542; Waterman vs. Olark, 70 111. 428; Himrod vs. Baugh, 85 111. 435; Eonehel vs. Lofquist, 46 111. App. 442; Reeves vs. Chambers, 67 la. 81 ; 24 N. W. 602 ; Spencer vs. Almoney, 56 Md. 551; Concord vs. Pillsbury, 33 N. H. 310; Andrews vs. Verrell, 46 N. H. 17; St. Paul vs. Leek, 57 Minn. 87; 58 N. W. 826; Wagner vs. Stocking, 22 0. S. 297 ; HoUister vs. Davis, 54 Pa. 508 ; Wartman vs. Yost, 22 Grat. 595; McHardy vs. Wadsworth, 8 Mich. 349; Pierce vs. Bent, 69 Me. 381; Pickett vs. Andrews, 69 S. E. 478; 136 Ga. 299. =17 Fall Kiver National Bank vs. Slade, 153 Mass. 415; 26 N. E. 843; Tolerton & Stetson Co. vs. Roberts, 115 Iowa 474; 88 N. W. 896; Ad- vance Thresher Co. vs. Hogan, 74 0. S. 307; 78 N. E. 436; Livermore Falls Trust & Banking Co. vs. Rich- moad Mfg. Co., 79 A. 844; 108 Me. 206; Kissire vs. Plunkett-Jarrell Grocer Co., 145 S. W. 507 ; 103 Ark. 473. 182 THE LAW OF SUEETYSHIP. may apply the proceeds of collateral to the payment of such debts as are unsecured/" The promisor may avail himself of all the riglits of the prin- cipal as to the application of collaterals, and if, at the time of the creation of the debt or the delivery of the collateral, the principal directs that they are to be held for the special debt for which another is surety or guarantor, the latter may be dis- charged to the amount of the value of such securities, if they are other^vise applied/^^ But such right to control the application of the security, cannot be exercised after the transaction has been completed, and the security delivered. The creditor, under these circum- stances, may exercise his option to apply the proceeds of the collateral as his own interests may require/^" If a creditor has both a personal remedy against a promisor in suretyship, and also a fund or security in his hands to which he might resort, and the latter is a fund or security not avail- able to the promisor by way of subrogation, a court of equiiy 218 Lester vs. Houston, 101 N. C. case, the creditor is regarded as a 605; 8 S. E. 366; North vs. La trustee of the security deposited Flesh, 73 Wis. 520; 41 N. W. 633; with him, for the benefit of all par- Hanson vs. Manley, 72 la. 48; 33 ties known to him to be interested N. W. 357. ■ in it, and is bound to administer the 219 Mellendy vs. Austin, 69 111. trust created by the deposit, unless 15; Hidden vs. Bishop, 5 R. I. 29. discharged by the surety, in his re- This case holds that the promisor lief, as well as in accordance with has the same right to his discharge his own interests and those of tlie if the collateral is diverted, whether principal. It follows, that any ap- he had knowledge or not at the time plication of the security by the cred- he made his contract, of the terms itor to other purposes than those under which the creditor holds the marked out by the terms of the de- collateral. The Court said: "The posit, or any decrease of its value by equity which entitles a surety to the means of his negligence or mistake, benefit of all securities of the prin- discharges the surety from liability cipal deposited with the creditor to to him in that character, to the ex- assure payment of the debt, is whol- tent of the misapplication or de- ly independent of any contract be- crease of value thus occasioned." tween the surety and the creditor, Baugher vs. Duphorn, 9 Gill (Md.) and indeed of any knowledge on the 314; Pearl vs. Beacon, 24 Beav. 186. part of the surety of the deposit of 220 Field vs. Holland, 6 Cranch 8; the securities In such Nat'l Bank vs. Bigler. 83 N. Y. 64. SUEETY8HIP DEFENSES. 183 will require the creditor to first apply such collateral, before enforcing tbe personal remedy. "^^ But such relief is based upon special equities, and is not ex- tended where the creditor merely exercises his choice of two remedies for the collection of the debt, leaving the securities in his hands immediately available to the promisor by subrogation, in case the creditor chooses to enforce his rights against him."^'' The natural equity involved in the proposition that a creditor owes a moral duty to save the accommodating party fi'om losp where it can be done without injury to himself, has found ex- pression in the statutes which provide that in the case of a joint or several judgment, against a principal and surety in the same action, execution shall first issue against the principal, and no execution shall be laid upon the property of the surety, till tlie property of the principal has been exhausted. The statutes in this respect must be complied with by the issue of an execution against the principal, even though such execution is fruitless by reason of the insolvency of the prin- cipal."" »"! Hayes vs. Ward, 4 Johns. Ch. 123. In this ease, the creditor, as additional security, took from the principal a mortgage, which was void because of usury, and the sure- ty brings this action to enjoin the creditor from action against him un- til he had first proceeded upon his mortgage. The injunction was al- lowed, upon the theory that the mortgage, because of the usury, would not be available to the surety, and that the creditor should not have the right to require payment of the surety, leaving the latter to pro- ceed against the fund in the cred- itor's hands, made valueless by the creditor's own act. The reasoning of this case is not convincing, for whether the mort- gage in the hands of the creditor is valid or not, the surety is not the loser; if the mortgage is valid, the title of the principal would be re- stored on payment of the debt by the surety, leaving to the surety the option to proceed against the prop- erty by direct action for indemnity, or by subrogation to foreclose in the right of the creditor. If the mort- gage is invalid, his right to subject the property in his action for in- demnity is not impaired, and the taint of usury in the transaction does not affect him. 222 Davis vs. Patrick, 57 Fed. Rep. 909 ; Bingham vs. Hears, 4 No. Da. 437; 61 N. W. 808; Thorn vs. Pink- hara, 84 Me. 101; 24 Atl. 718; Allen vs. Woodard, 125 Mass. 400; Penn vs. Ingles, 82 Va. 65; Aultman va. Smith, 52 Mo. App. 351. 223 Johnson vs. Harris, 69' Ind. 305; Crawford vs. Turnbaugh, Trus- tee, 86 0. S. 43; 98 N. E. 858. 184 THE LAW OF STJEETYSUIP. §119. Revocation — Death of the promisor. If the contract is executory, such as a commercial guaranty of future optional advances, tlie obligation is not binding upon the promisor until acted upon hj the creditor, and may be re- voked by notice at any time before it becomes binding ; or if the advances are divisible, each advance is a separate consideration, and the promisor may at any time, terminate the -engagement as to future or additional advances. In such cases, the death of the guarantor, operates as constructive notice of a revocation from the time that knowledge of the death is brought home to the creditor. ^^* The contract of the surety is not in general revokable by notice, and such promisor cannot withdraw from his obligation, without the consent of the creditor, unless stipulated in his con- tract or provided by law, as in cases of bonds of public officers in some jurisdictions* The same rule applies to ah executed contract of guaranty. The death of the surety or guarantor, where the contract is executed, and the consideration passed, does not revoke the obligation, and the estate of the promisor will be liable for de- fault committed subsequent to the death. Thus a bond was required of an applicant for election as a member of an Underwriting Association, and the bond being furnished, he was elected to such membership. The considera- tion was wholly executed, and consisted in the giving to the principal the status and privileges of such membership, and it was held that the death of the surety on the bond, although knovra to the Association, did not revoke the obligation, and that the estate was liable for defaults subsequent to the ^eath.^"^^ The same situation arises where a surety engages that sai- =21 Ante Sec. 71. 225 Lloyd's vs. Harper, 16 Ch. Div. See Jordan vs. Dobbins, 122 Mass. 290. 168, where it is held that the death See^ also Kernochan vs. :Murray, of the guarantor operates as a revo- HI ^^- ^- 306; 18 N. e. ggS. cation, even though the creditor . Bondsmen ,n a bastardy proceed- , ' , , J. J „„ ,„:+-u ing are released hv death of the makes the subsequent advances with- 4^; , p^ ,^ ^-^ rj,- 272 111. out notice of the death ; Aitken, bon gjg. -Jjg j^ E 372 & Co. vs. Lang's Admr., 106 Ky. 6.52: 51 8. W. 154. , SUEETYSHIP DEFENSES. 185 otiier will perforin the covenants of a lease,^^° or in the case of a contract for employment for a definite time, either in a private capacity or as a public ofiicer.^^' A bond for costs will survive the death of a surety.^^* Where the undertaking was to answer for the default of another, so long as he continued in the service as a collector, the suretyship was held to survive the death of the promisor, inas- much as by the terms of the' contract it was not terminable until the service was ended.^^° At common law where a surety became jointly liable with the principal, the death of the surety ended the obligation and the estate was released both as to past and future defaults. This was merely an application of the rule which prevailed at com- mon law as to all joint obligations. In the early eases it was held that the survivor must bear the whole burden of such con- tracts, even though the decedent participated in the considera- tion.^'" Courts of Equity, however, invented a fiction whereby joint obligations, in which both parties were participants in the con- sideration, were taken out of the rule by holding that such joint --'> Coe vs. Vogdes, 71 Pa. 383. notice of withdrawal, at least fro-m --'' Sliackamaxon Bank vs. Yard, the time when the knowledge of the 143 Pa. 129; 22 Atl. 908; Broome same has been brought home to the vs. United States, l.i How. 143; obligee. A Court cannot release a Mowbray vs. State, 81 Ind. 324; surety upon a, cost bond without the Snyder vs. State, 5 Wyo. 318; 40 consent of the party for whose ben- Pac. 441 ; Hightower vs. Moore, 46 efit the security has been given. Ala. 387; Rapp vs. Phoenix Co., 113 This feature of the obligation of a 111. 390; Eoyal Co. vs. Davies, 40 cost bond places it in the category la. 469; Holthausen vs. Kells, 45 N. of irrevocable guaranties, the obli- Y. S. 471; Hecht vs. Weaver, 34 gations of which continue according Fed. 111. to their terms, without regard to the 228 Fewlass vs. Keeshan, 88 Fed. death of the guarantor." Eep. 573, Taft, J.: "The rule as to See also McOosky vs. Barr, 79 the obligation of a guarantor in re- Fed. Rep. 408. speet to transactions occurring after 229 Calvert vs. Gordon, 3 Man. & his death is that the obligation is Ry. 124. not affected by his death if the con- 230 Towers vs. Moor, 2 Venn. 98 ; tract was one from which he might Lane vs. Doty, 4 Barb. 530; Demott not withdraw upon notice, but that, vs. Field, 7 Cow. 58; Foster vs. if he could have done so, then his Hooper, 2 Mass. 572. death will be given the eiTect of a 186 THE LAW OF SURETYSHIP. obligations must have been intended as joint and several, and written as joint contracts by mistake. ^^^ But Courts of Equity declined to extend the fiction to include parties not joining in the consideration, and the estate of a surety was held entitled to go acquit ^"^ 2S1 Simpson vs. Vaughan, 2 Atk. 31; Bishop vs. Church, 2 Vessey 100; Weaver vs. Shyrock, 6 Serg. & R. 262, Tilghman, C. J. : " It is a fair presumption, in the absence of all evidence to the contrary, that every man understands what he is doing, and that these obligors under- stood the long and well established difference between a, joint and a joint and several obligation. But this presumption may be rebutted by circumstances; and one circum- stance on which Courts of Equity have laid great stress, is, that the money for which the bond was given, was borrowed by, or came to the use of, both the obligors; in such case, the very act of borrowing, does, in itself, amount to a contract, ante- cedently to their entering into a bond, that each and both should be bound to pay. " When, therefore, the bond is aft- erwards so drawn as to constitute only a joint obligation, there is a reasonable presumption, that either through fraud, ignorance or inr.d- vertenee the meaning of the parties has not been carried into effect." If the suretyship contract was for the benefit of the surety, his estate will not be discharged from liability, such as the discharge of a prior ob- ligation upon which the surety was liable. Boyd vs. Bell, 69 Tex. 735; 7 South. 657; Richardson vs. Dra- per, 87 N. Y. 337. 232 Jones vs. Beach, 2 DeGex. M. & Y. 886; Getty vs. Binsse, 49 N. Y. 385; Wood vs. Fisk, 63 N. Y, 245; Risley vs. Browi, 67 N. Y. 160. Such rule will be applied, al- though the obligation is joint and several, if the creditor elects to re- cover a joint judgment, and thereby the right against the surety in sev- eralty is merged in the judgment. United States vs. Price, 9 How. 84, Grier, J. : " When an obligee takes a joint and several bond, he has nothing to ask of equity; his remedy is wholly at law. If he elects to take a joint judgment, he voluntarily repudiates the several contract, and is certainly in no bet> ter situation than if he had origi- nally taken a joint security only; equity gives relief, not on the bond, for that is complete at law, but on the moral obligation, antecedent to the bond, when the creditor could have had no remedy at law. " An obligee who has a joint and several bond, and elects to treat it as joint, may sometimes act un- wisely in so doing, but his want of prudence is no sufficient plea for the interposition of a chancellor. Nor can the conscience of a mere security be affected, who, having tendered to the obligee his choice of holding him jointly or severally liable, has been released at .law by the exercise of such, election." It is held that a judgment lien upon the property of a surety joint- ly liable with the principal, will sur- vive the death of the surety. Baa- kin vs. Huntington, 130 N. Y. 313; 2P N. E. 3:0. SURETYSHIP DEFENSES. 187 Nearly all the States in this country now express their dis- approval of the reasoning which exonerates' the estate of a surety, by the enactment of statutes holding the estate of the surety to the same liability as if the surety had survived.^''^ 233 Burgoyne vs. Ohio, 5 0. S. 586, Ranney, J.: "This Statute ef- fected an entire abrogation of the common law principle to which allu- sion has been made, and left the estate of the joint debtor liable to every legal remedy, as fully as though the contract had been joint and several." See also Mays vs. Cockrum, 57 Tex. 352; Donnerberg vs. Oppen- heimer, 15 Wash. 290; 46 Pac. 254; Powell vs. Kettelle, 6 III. 491. The Common Law rule as to the dis- charge of the estate of a deceased joint obligor, has never been in force in Indiana. Hudelson vs. Arm- strong, 70 Ind. 99. The appointment of a receiver for a surety company does not termi- nate existing contracts. Evans vs. Illinois Surety Company, 298 111. 101 ; 131 N. E. 262. "On the death of the surety or dissolution of a surety corporation there certainly can be no difference, in principle, between individual and corporation. If death does not relieve an indi- vidual surety from the obligation he has entered into, the dissolution or receivership of a, corporation can not relieve a corporate surety." The. death of a, surety on a replevin bond dioes not change thte liability of his estate upon the bond; it ie the' sajme as his liability would have been had he liived. Union Trust Oo. vs. Shoe- maker, 258 111. 564 ; 101 N. E. 1050. A mere guarantee of advances, no present consideration being given, is but an offer for successive unilateral contracts which the death of the offeror ipso facto terminates. Aiken vs. [Lang's Admr., 106 Ky. 652; 51 S. W. 154; Hyland vs. Habieh, 150 Mass. 112; 22 N. E. 765. But where a contract has been made, death does not terminate it. Kernochen vs. Murray, 111 N. Y. 306; 18 N. E. 868. Losing sight of this fundamental distinction seems to have led to confusion. Thus, mere guarantees have been called contracts terminable upon notice of death either by reading such a limi- tation into the contract or by hold- ing the consideration divisible. Valentine vs. Donahue-Kelly Baking Co., 133 Cal. 191; 65 Pac. 381. Where the guarantee is merely in- tended as a.n offer, the seal will not prerrent its termination by the death of the guarantor. Jordan vs. Dob- bins, 122 Mass. 168. But some courts will require notice to the creditor. Gay vs. Ward, 67 Conn. 147; 34 Atl. 1025; Nat. Eagle Bank vs. Hunt, 16 E. I. 148; 13 Atl. 115. CHAPTER V. Sec. 121. Sec. 122. Sec. 12S. Sec. 121. Sec. 125. Sec. 126. Sec. 127. See. 128. Sec. 129. Sec. 130. Sec. 131. BONDS TO SECURE PRIVATE OBLIGATIONS. Sec. 120. Private Obligations nLstiugiiished from Official Duty in Public Office. A Bond is a Specialty — Form and Execution. The Signing and Sealing of a Bond. Delivery and Acceptance are Necessary to the Validity of a Bond. Incomplete Bonds — Right of the Obligee to Fill Blanks. The Incorporation of Other Instruments Into the Bond by Ref- erence. Consideration. Bonds Obtained by Fraud or Misrepresentation. Parol evidence in Aid of Construction. Commencement and Duration of Liabildty Upon a Bond. Bonds of Genera,! Indemnity. Bonds to Secure Building Contracts, with Covenants for the Pay- ment of Labor and Material Claims. Sec. 132. Alteration of the Principal Contract as a Defense to Sureties Upon the Bond. Alterations in Bond as a Defense to the Sureties. Surety Upon Bond Estopped from Denying the Recitals of the Bond. Measure of Damages Upon Breach of the Conditions of a Bond. Same Sulbject — Where the Penalty or Forfeiture is Imposed by Statute. Interest as an Element in the Measure of Damages. Bonds to Induce Violation of Law are Void. Bonds to Prevent Performance of Public Duty or to Induce Acts In Violation of Public Duty are Void. Sec. 140. Discharge of Surety Upon a Bond by Payment or Acts Equiv- alent to "ayment Sec. 141. Statutes of Limitations as n Defense to Sureties Upon a Bond. Sec. 142. As to Who are Proper Parties in an Action Upon a Bond. Sec. 143. Joinder of Parties Plaintiff. Sec. 144. Joinder of Parties Defendant. 188 Sec. 13'3. Sec. 134. Sec. 13.5. Sec. 136. Sec. 137. Sec. 138. Sec. 139. PRIVATE OBLIGATIONS. 189 ,§120. Private obligations distinguished from official duty in putlic office. Private obligations are contractual, and the duties imposed arise from the agreement of the parties. Official duty in Public Office is imposed hj law, the terms of which are either expressed directly in a statute deiining the duty, or implied from the statute creating the office. Private obligations are subject to the will of the parties, they are conventional, and in varying form as the parties may finally stipulate between themselves, . and may thereafter be waived in whole or in part. Official duty is fixed, and subject to no modification or waiver by convention between the obligor and obligee. It de- pends on the law for its expression, and no representative of the Sovereign power, whether executive or judicial, is clothed with authority to suspend or vary the terms of Official duty. Bonds to secure the performance of private contracts, and bonds of Public Officers, by reason of these inherent differences in the character of the obligation to be secured, are subject to rules of construction which differ in many important respects. In this chapter will be discussed bonds given to secure the performance of voluntary contracts, whose terms are wholly defiped by the parties themselves, without any dictation from the law, although, in some instances, the law dictates the kind of bond that must be made as a security, such as bonds to secure the performance of contracts made with the State or Munici- pality in furnishing supplies or erecting public works. General and special indemnity bonds, including agents and employees in positions of trust; bonds to secure the perform- ance of building contracts, or to secure against loss from failure of title, or to indemnify against the consequences of legal ac- tion, bonds against loss by reason of the insolvency or other breach in the contract of another, constitute the special field of this chapter. 190 THE LAW OF SURETYSHIP. §121. A bond is a specialty '— Form and execution. A bond is an instrument of great formality, made usually with care and deliberation, and -except in those States where private seals are abolished by Statute, is required by law to be under seal, and is a specialty. In its formal parts it purports to bind the obligors and their heirs and representatives, Avith recitals asi to the terms of the principal contract, and the duty or indenmity to be secured, with a defeasance or conditional covenant, setting out the limita- tions upon the liability of the sureties. It is not necessary that the bond recite with nice precision the several constituent terms of the undertaking. Apt words may always be found to express exactly the partic- ular contract which in law is deduced from a bond, but the obligation will not fail because the parties employed less ap- propriate words to express their meaning. "^ It is essential, however, that the instrument recite that there is a debt or obligation to be secured, with a promise to pay the debt or perform the obligation,^ and there must appear in some form the condition upon which the obligation is to become void. Otherwise the instrument is not a bond, and will not impose any liability upon the surety.'' Also a bond will be a nullity unless the obligee is named therein. 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.^ Llnhabitantsof TresGottrs. Moan, If the obligee is described with „,,?■ f ,,, , , , , ^T T sufficient certainty to identify liim, 2 Wood vs. Clietwood, 44 N. J. ,,, , ^ ', ., .„ / „' gq g4 althougti not named, it will be suffl- 3 Fitzgerald vs. Staples, 88 111. cient. Thus where the obligation 234. was to pay a certain note which o ^^f^'om ^«i,®^°^«' 13,/-, I- 53^; was described in the bond, and the 9 Atl. 901; Skcra vs. Hudson, 59 , ^, , , . Tex. 207; Preston vs. Hull, 23 Gratt, °^™*' °* ^^^ ^^^^^ °^ the note given, 600; Pelham vs. Grigg, 4 Ark. 141; it was considered that the obligee People vs. Pacific iSurety Co., 50 was described with sufficient certain- Colo. 273; 109 Pac. 961; Ann. Cases +„ t„.,„i, . t?i • oc -vt n 1012r "17 ^ ".="=" ty_ Leach vs. Flemming, 85 N. C. B Phelps "vs. Gall, 7 Irod. (N. 0.) '^'^■ 202. PRIVATE OBLIGATIONS. 191 These questions are here made without reference to the right of the holder to fill in blanks and supply the omissions as to names, dates and other formal requirements.*^ But where this has not been done, under the rules for the completion of unfinished instruments by the application of the principles of agency, the courts will generally refuse to permit a reformation, such as for instance, the admission of parol proof to supply the amount of the penalty, where it has been left blank.' It is not necessary that the name of the obligors appear in the body of the instrument. These names being signed to the paper will sufficiently establish a promise, although blanks are left for the name of the obligor in the covenant which recites the promise.* §122. The signing and sealing of a bond. A bond which purports to be the obligation of both the prin- cipal and surety, must be executed by both. If the principal does not sign, the surety is not bound." But where the principal in a bond would be liable without reference to the bond for the acts constituting the breach, and by the terms of such bond the parties bind themselves severally as well as jointly to perform its conditions, the failure of the principal to sign the bond will not release the surety from liability."" Many forms of bonds do not require the signature of the prin- cipal. The latter is already liable to the obligee upon the con- tract which the bond secures, and no additional liability is created by including him as a party to the bond, although it serves a useful purpose in the matter of the remedy for en- »Post Sec. 124. Bjoin vs. Anglim, 97 Minn. 526; JiOhurch vs. Noble, 24 111. 291; 107 N. W. 558; Selby vs. City of Copeland vs. Cunningham, 63 Ala. New Orleans, 119 La. 900; 44 So. 394; Evarts vs. Steger, 6 Ore. 55. 722; Bryant vs. Kinyon, 127 Mich. 8 Partridge vs. Jones, 38 0. S. 152; 86 N. W. 531; North St. Louis 375; Building Association vs. Cum- B. & L. Assoc, vs. Obert, 169 Mo. mings, 45 0. S. 664; 16 N. B. 841; 507; 69 S. W. 1044; Novak vs. Pit- Howell vs. Parsons, 89 N. C. 230; lick, 120 la. 28i6; 94 N. W. 916; Danker vs. Atwood, 119 Mass. 146; La Belle Iron Works vs. Quarter Moore vs. McKinley, 60 la. 367; Savings Bank (W. Va.), 82 S. E. 14 N. W. 768. 614. 9 Goodyear Dental Vulcanite Co. » PKIVATE OBLIGATIONS. ;|9_r, Where a bond recites that it shall run for 12 months from ita date, the surety will be liable for defaults occurring between the date and the delivery. ^^ §124. Incomplete bonds — Right of the obligee to fill blanks. The delivery of bonds in an incomplete form vs^ill generally fall within one of two classes. Where the instrument comee to the obligee with blank spaces which must be filled in, in order that the bond may take effect, but without any direction or condition being communicated to the obligee as to what shall be placed in these blanks, or Where the bond is delivered incomplete, but with an under- standing as to how it is to be completed. In the first of these cases, there arises an implication that the blanks may be filled by the holder in such a manner as will make the obligation binding upon the parties.^^ In the latter case, the holder is limited to the real contract, and nothing in addition to the agreement of the parties can be inserted, even though the instrument does not thereby become complete and effective, and if the holder or his agents have added conditions not agreed upon, or failed to insert stipula- tions as directed, the sureties under a plea denying the execu- tion may show the real understanding of the parties.^^ 21 ^tna Life Ins. Co. vs. Ameri- Peace to draft the bond, and the can Surety Co., 34 Fed. Rep. 291; obligors stipulated the conditions Supreme Council Catholic Knights agreed upon, and signed the bond vs. Fidelity & Casualty Co., 63 Fed. in blank, intrusting to the Justice Rep. 48; Post Sec. 130. to fill it in as stipulated. The See also Oregon Ry. & Nav. Co. bond was not filled in as agreed, vs. Swinburne, 22 Ore. 574; 30 Pac. and being set up as a counter- 322. claim in an action by the obligor 22 South Berwick vs. Huntress, 53 against the obligee, held — Earl, J. : Me. 89 ; Dolbeer vs. Livingston, 100 " If this had been a complete bond Cal. 617; 35 Pac. 328; Rose vs. when the plaintiff signed it, al- Douglass Township, 52 Kan. 451; though by mistake or fraud, it did 34 Pac. 1046; Kinney vs. Schmitt, not express the true agreement be- 12 Hun 521. tween the parties, his sole remedy 23 Richards vs. Day, 137 N. Y. would have been to procure its re- 183; 33 N. E. 146. In this ease the formation, and when an effort was parties employed a Justice of the made to enforce the bond against 196 THE LAW OF SUKETYSHIP. §125. The incorporation of other instniments into the bond bf reference. A bond is executed to secure some other contract between the principal and the obligee. The terms of that contract are a necessary part of the bond, and for convenience as well as to avoid mistake in the exact terms of the obligation assumed, it is usually deemed sufficient to incorporate the main contract in the bond by reference, thus making it part of the bond, the same as if fully set out. A mere reference, however, without reciting in the bond the substance of the contract referred to, would be void for imcer- tainty, such as a reference to a building contract, and the plans and specifications, without designating other facts to identify what. building is referred to. If the main contract is broader in its scope than the limits fixed in the bond, a reference to the contract will only incor- him he could not contradict the terms thereof by parol evidence, ex- cept by proper allegations in his pleading asking for its reformation. But here the plaintiff did not sign any bond. He signed a. blank piece of paper, and it would have been suf- ficient for him on the trial to prove that he simply signed a blank piece of paper, and then it would have been necessary for the defendant to show that he authorized the blank to be filled up, and how and under what circumstances, the authority was given and what the authority was. A party who signs a blank piece of paper cannot be bound to the obligation written therein, un- less it can be shown that he gave the person who wrote it authority. .... Suppose the justice of the peace, instead of inserting payments in this bond, as agreed, had inserted therein a conveyance of real estate, or a bond for absolute payment of the principal of a large sum of money ; or, suppose the plaintiff had signed this blank bond without au- thorizing any one to fill it up, and some unauthorized person had af- terward filled it up as it now ap- pears ; in either of these cases would the bond thus filled up and com- pleted in form have been the bond of the plaintiff? Certainly in neith- er case could it have been said that the plaintiff executed such a bond. " Here so far as the bond departed from the agreement of the parties it was not the bond of the plaintiff. The only authority the justice of the peace had was to insert in this bond the precise agreement of the parties as directed. As he did not do that this is not, in the form it now appears, the bond of the plain- tiff, and under a denial that he executed the bond he may show the circumstances under which he sign- ed his name and what the agreement at the time he signed it was." PBIVATE OBLIGATIONS. 197 porate so much of the same as is within the limits of the terms of the bond.^^" Thus where a building contract provides for the performance of labor and the furnishing of the material, and the bond is given to secure the performance of the labor in accordance with the contract and specifications, which contract and specifications are made a part of the bond by reference. Such reference will not render the surety liable for default in furnishing the mate- rial.^* In general the bond will be construed in accordance with the terms of the agreement as ascertained by reading together .the bond and the contract to which reference is made.^'' 23o Morgan va. Salmon, 135 Pac. 553. -* Dunlap vs. Eden, 15 Ind. App. 575; 44 N. E. 560. The bond in this case recited that the principal had entered into a contract to per- form the labor and furnish the ma- terials, but the defeasance clause in the bond reads, "Now should the aforesaid contractor do and ccrm- plete said ivork as aforesaid, etc.," omitting all reference to furnishing the materials, the liability arisdng out of materials was considered not to be within the scope of the bond. Noyes vs. Granger, 51 la. 227; 1 N". W. 519. See also Electric Appliance Co. vs. V. S. Fidelity & Guaranty C!o., 110 Wis. 434; 85 N. W. 648. Here the Building Contract pro- vided that the Contractor would per- form the labor and furnish the ma- terials, and would pay all claims for ls.bor and materials. The contract also provided for the giving of a bond to secure the performance of all the covenants of the contract. The bond was conditioned for the performance of the labor, and fur- nishing of material, but omitted the covenant in reference to the pay- ment of claims. It contained, how- ever, a general clause that the con- tractors should "Well, truly and faithfully comply with all the terms, tovenaints, and conditions of said contract on their part to be kept and performed, according to its terms." The Court held: "The fact tha,t the city expressly contracted that the bond given should be given for the payment of materialmen and la- borers, and then" accepted a bond without such a condition, is clearly a waiver of that condition of the contract, and indicates an intention to abandon or relinquish its Scheme in chat respect." 2s Forst vs. Leonard, 112 Ala. 296; 20 South. 587; Mackenzie vs. Edinburg School Trustees, 72 Ind. 189; Boley vs. Lake Street Elevated 11. R. Co., 64 111. App. 305 ; Bartlett vs. Wheeler, 195 111. 445; 63 K E. 169; Hiller vs. Daman, 183 Mo. App, 317 Jordaji vs. Kavanaugh, 63 Iowa 152; 18 N. W. 851. In this case the contract referred to, obligated the principal to perform the labor of constructing a railway, and to pay the claims of labor and materialmen, and the Surety was held to have as- piJiried, by this reference, a liability for the performance of the entire contract, including the payment of labor and material claims. City of New York vs. New York Refrigerator Co., 82 Hun 553; 31 N. Y. S. 714; Kimball Co. vs. Baker, 198 THE LAV.' OF SUEETYSIIIP. Wliere the reference is to the By-Laws of a Corporation, for a further description of the duties of an officer whose fidelity is the subject of the bond, it is held that the Sureties incorporate the by-laws into their contract.'* §126. Consideration. The main contract which the bond secures furnishes a consid- eration for the bond, where the one depends upon the other, such as where the obligee agrees to make a contract with the principal upon the condition that the latter will furnish a bond,^' or where a contract of employment is tendered upon the condition that the employee will give a bond. Where the By-Laws of a Bank required that its Cashier give a bond before entering upon his duties, the employment was held to be sufficient consideration for the bond.''* 62 Wis. 526; 22 N. W. 730; Locke vs. McVean, 33 Mich. 473 ; State va. Tiedemann, 69 Mo. 515. 20 Humboldt Sav. & Loan Soe. vs. Wennerhold, 81 Cal. 528; 22 Pac. 020. 27 Smith vs. Molleson, 148 N. Y. 241; 42 N. E. 669. If the main contract is for any reason not binding on the principal, the bonid given to secure its per- formance is vpithout consideration and not binding on the obligor. Keith County vs. Ogalalla Power & Irrigation Co., 64 Neb. 35; 89 N. W. 375. 28 La Rose vs. Logansport Nat. Bank, 102 Ind. 332; 1 N. E. 805. In this case the cashier entered upon the performance of his duties, two \i'epks before giving his bond, and the contention was that there was no consideration for the bond, since liis employment was not made to depend upon it, and that the obligee had in effect waived the requirement for the bond by permitting him to «nter upon his employment without it. The Court said: "It is further contf-nded, that as the complaint avers that G. was appointed cashier on the 9th day of January, 1878, and the bond was not approved until tlie 23d day of January, 1878, the bond was in consequence executed without consideration. "We do not agree with this view of the case. It is averred in the complaint that a by-law of the bank, which is set out, required the cash- ier to execute a bond in a stipu- lated amount, and that in pursuance thereof the bond in suit was exe- cuted. Whether tbe cashier entered upon his duties before or after the bond was approved, does not ckarly appear. Nor is it material. It does appear that the bond was required, and that in pursuance of such re- quirement, the bond in suit was exe- cuted and approved, and that G. entered upon and continued his du- ties as cashier. It is clearly im- plied, if it is not averred in terms, that lie obtained and continued in office as cashier, by reason of the fact that the bond was to be and was executed. This was a sufficient consideration, and the bond was ef- fectual and operative, at least, from the date of its approval." PEIVATE OBLIGATIONS. jgg A consideration cannot be founded upon a contract already executed, before the bond was required, as where after land had been conveyed by warranty deed, and an incumbrance not before known to the grantee is discovered, it was held that the purchase of the land did not amount to a consideration for the bond of indemnity, thereafter demanded and furnished by the grantor, and that the sureties were not liable, there being no new consid- eration.^" Again where the bond to secure a building contract was not demanded until two months after the date of the contract, it was held that there was no consideration.^" The mere fact that the bond was executed subsequent to the building contract, will not of itself avoid the consideration, where it is shown that the contract was made upon the condition that the bond would be furnished at a later date.'^ A seal upon a bond imports a consideration.^^ In those States where seals are abolished, and the consideration is not expressed upon the face of the bond, it may be shown by parol.*" But where a consideration is recited in the bond it cannot be contradicted by parol.''* The burden of proving a failure or lack of consideration is on the party who makes the claim.'° An instrument in the form of a bond where seals are not re- quired, although not expressing any consideration, will be 29 Peek vs. Harris, 57 Mo. App. 32 Awte, Sec. 123; Patterson vs. 467. A bond of indemnity to a Chapman, 179 Cal. 203; 176 Pae. 37. Sheriff, to induce him to perform a 33 Singer Mfg. Co. vs. Forsyth, duty enjoined upon him by law, will 108 Ind. 334; 9 N. E. 372; Miller be void for want of consideration. vs. Fichthorn, 31 Pa. 252. Mitchell vs. Vance, 5 T. B. Mon. 34 Cocks vs. Barker, 49 N. Y. 107 ; (Ky.) 528. Miller vs. Bagwell, 3 McCord (IS. 30 Ring vs. Kelly, 10 Mo. App. 411. C.) 429. 3iOberbeck vs. Mayer, 59 Mo. 35 Brown vs. Kinsey, 81 N. C. 245; App. 289; Smith vs. MoUeson, 148 Beeson vs. Howard, 44 Ind. 413. N. Y. 241; 42 N. E. 6'69; Stauber Mere inadequacy of consideration vs. Ellett, 140 Mich. 271; 103 N. without fraud or imposition, is not ^ oQg classed as a failure or want of con- L ■ _ ,, -XT J. T. 1 sideration, and is not a defense to See also Fourth Nat. Bank vs. a^ auction upon a bond. Winslow vs. Spinney, 47 Hun 293. Wood, 70 N. C. 430. 200 THE LAW OF SURETYSHIP. deemed prima facie to import a consideration, until the con- trary is showH.'° A bond given in response to a discretionary order of the court is not v«id for want of consideration.'"" A bond executed pursuant to and in substantial conformity with the provisions of a statute needs no consideration.^'"' .§<127. Bonds obtained by fraud or misrepresentation. The proposition that fraud vitiates all contracts must be deemed to exclude suretyship contracts, except in those cases where the creditor participates in the fraud, or makes his ad- vances with knowledge of it.'' A bond is a contract between the surety and the obligee, and will not be avoided merely by showing that it was executed by the surety relying upon misrepresentation of the principal, or that it was induced by his fraud. If a surety signs a bond upon the condition that another is to sign as co-surety, and it is delivered by the principal to the obligee without complying with this condition, withholding from the obligee all knowledge of the condition, the delivery is fraud- ulent as against the surety, but he cannot be released on account of it.'' The doctrine of special agency does not apply where a party holds out the principal as worthy of confidence, by intrusting him with the paper bearing his signature, coupled with no limi- tations, on the paper itself, as to its use. There is no equity in punishing the obligee for the misplaced confidence of the surety.'" 36 Luce vs. Foster, 42 Neb. 818; 673; Linn Co. vs. Farris, 52 Mo. 75; 60 N. W. 1027. Graves vs. Tucker, 18 Miss. 9:- Dair In Iowa, Kansas, Tennessee, Mis- vs. U. S., 16 Wall. 1; Butler vs. U. souri, Texas, California, Dakota, S., 21 Wall. 272; Belden vs. Hurl- Alabama, and Florida, the Legiala- but, 94 Wis. 562; 69 N. W. 357; ture has enacted that all contracts Tliomas vs. Bleakie, 136 Mass. 568; in writing import a consideration. Title Guaranty & Surety Co. vs. seaWhereatt vs. Ellis, 103 Wis. Schmidt, 213 Fed. 199. 348; 79 N. W. 416. See also Lair- For additional cases upon this sen vs. Winder, 20 Wash. 419; SS point, see Ante Sec. 109. Pac. 563, where it is held that al- Ccmtra — Guild vs. Thomas, 54 though the- appointment of u, re- Ala. 414. ceiver for a partnership may have Smith "s. Kirkland, 81 Ala. 345; been wrongful, yet a bond given by 1 South. 276. This Court considers one partner ini order to- obtain pos- that the dw^trine of equitable estop- session of the property from the re- pel does not apply because of the ceiver is based upon a valid con- negligence of the obligee in not mak- sideration and is binding on the ing inquiry as to whether the surety obligors. signed under some condition which sof State vs. Paxton, 65 Neb. 110; has not been fulfilled. 90 N. W. 983. 39 See People vs. Bostwick. 32 N. 3' Ante Sec. 108. Y. 445, where the doctrine of Special 38 Dangler vs. Baker, 35 0. S. Agency is upheld, but in effect over- PKIVATE OBLIGATIONS. 201 Any active fraud of the obligee, or an acceptance of the bond with knowledge of the fraud of the principal, will release the surety, for the same reasons that apply to the defense of fraud in the making of simple contracts/" The concealment by the obligee of any fact material for the surety to know, and which if known to the surety might have prevented him from signing, is an act of fraud which will dis- charge the surety.*^ ruled in Russell vs. Freer, 56 N. Y. 67. *o Nelson vs. Howe Mach. Co., 10 Ky. L. Rep. 37. Watriss vs. Keree, 32 N. H. 560. In this case the Surety signed upon the understanding, communi- cated by the obligee, that by virtue of his bond, the principal was to re- ceive $10,000, and it was so recited in the bond. Whereas there was a contemporaneous agreement between the principal and obligee, concealed from the Surety, that the principal was to have only $8,317. This was held a fraud upon the Surety, and be was released. Fishburn vs. Jones, 37 Ind. 119. See Speneer vs. Handley, 5 Scott (N. R.) 546. Evidence which shows that the obligee had notice of the conditions under which the Surety signs, such as the appearance in the body of the bond of the names of sureties who do not appear as signers, would be sufficient to discharge the surety. Pawling vs. U. S., 4 Cranch 219; Ware vs. Allen, 128 U. S. 590; 9 S. Ct. 174; Markland vs. Kimmel, 87 Ind. 560; Hessell vs. Johnson, 63 Mich. 623; 30 N. W. 209; Mullen vs. Morris, 43 Neb. 596 ; 62 N. W. 74. . Where the surety signs upon con- dition that another will sign as co- surety, and the principal subse- quently erases the name of the ad- ditional surety, held in Allen vs. Marney, 65 Ind. 398, that the obligee is chargeable with notice of the fraud. In this ease the erasure was apparent. In Nash vs. Fugate, 32 Gratt. 595, it was held that the fact that there were additional scrolls for the sig- nature of other parties than those who had signed, was not sufficient notice to chargf the obligee. But see Ordinary of New Jersey vs. Thatcher, 12 Vroom 403. Where it is held that a delivery of a bond cannot be made upon con- dition; that the act of delivery merges all conditions not expressed on the face of the bond, and al- though the instrument is delivered upon . condition that another would sign before the bond should be in force, such condition cannot be shown as a defense. Moss vs. Rid- dle, 5 Cranch 351 ; Blume vs. Bur- rows, 2 Ired. (N. C.) 338. *l Connecticut General Life Irs. Co. vs. Chase, 72 Vt. 176; 47 Atl. 825 ; Third National Bank vs. Owen, 101 Mo. 558; 14 S. W. 632; Remington S. M. Co. vs. Ke- zertee, 49 Wis. 409; 5 N. W. 809; Franklin Bank vs. Cooper, 36 Me. 179; Harrison vs. Lumbermen's Ins. Co., 8 Mo. App. 37 ; Railton vs. Mathews, 10 CI. & Fin. 934; Cooper Process Co. vs. Chicago Bonding & Insurance Co., 262 Fed. 66; 8 A. L. R. 1477, note. For additional cases upon this point see ante, iSec. 106. 202 THE LAW OF SUEETTSHIP. To come within this rule, however, the conceaknent must re- late to acts of dishonesty. Mere delinquency in payments due under former employment, not amounting to default, in the nature of a conversion, will not avoid the bond.*^ Where the surety refuses to sign except upon the condition that another signs as co-surety, and in order to show an appar- ent compliance with that condition, the principal adds the name of another by forgery, this will not release the surety as against the creditor who makes advances upon the bond, without knowl- edge of the fraud/'' §128. Parol evidence in aid of construction. In general the liability upon a bond is limited to its recitals. The obligations cannot be enlarged or restricted by parol. The Surety is entitled not only to the protection of the ordinary rules of evidence relating to written instruments, but to the addi- tional protection of the Statute of Frauds, whereby no action can be maintained upon a promise to pay the debt of another, unless the promise is in writing. Such promise cannot therefore rest partly in writing and partly in parol. The purpose and intent for which the bond was executed must be deduced from the writing alone.** Agreements made out- side the bond, wherein the obligee stipulates that the obligations will not be enforced against the surety, cannot be considered.*^ If the recitals in the bond do not show the real agreement of the parties, by reason of a mistake, such mistake cainnot be shown by parol in an action brought to enforce the bond, but the correction can only be made by a Court of Equity in aa action to reform the instrument.** <2 Home Ins. Co. vs. Holway, 55 *^ Barnett vs. Barnett, 83 Va. la. 571; 8 N W. 457; Howe Mach. 504; 2 S E. 733; Cowel vs Ander- ' . , „„' „ ,„, son, 33 Minn. 374; 23 N. W. 542: Co. vs. Farrington, 8? N. Y. 121. McGuire vs. Gerstley, 204 U. S. 489. " See Ante See. 108 and cases ,, Cunningham vs. Wrenn, 23 111. there cited. 62. In this case a bond was given ** Hydraulic Press Brick Co. vs. to secure the performance of a con- Neumeister, 15 Mo. App. 592; Bel- ^T^"^ *<> deliver brick. By mistalce , . ^ , „„^T tT „„r. the amount of brick was stated in lorn vs. Freeborn, 63 N. Y. 383; the bond as 1,000 instead of 100,000, American Surety Co. vs. Thurber, and in an action upon this bond, it 121 N. Y. 655; 23 N. E. 1129. PKIVATE OBLIGATIOJSf;. ' 203 Where the principal and the obligee enter into an agreement, Rnd a bond is given to secure its performance, and the bond recites some of the obligations of the main contract, but not all, the liability imder the bond will be limited to the recitals, where the contract is not incorporated into the bond by reference." ' The rules relating to parol proof in aid of construction of bonds, do not exclude such proof when tendered to explain am- biguities. The law does not favor forfeitures, and proof will be received to explain ambiguous terms, so as to make the bond effective. Thus a person gave a bond for the faithful performance of his duties as Ticket Agent for a Railway, in a city where the obligee maintained several Ticket Offices, without reciting in the bond to which office the agent was appointed. It was held that parol proof was admissible to determine the scope and ap- plication of the bond in this respect.*^ Where words are used in a special sense, or in the vernacular of a particular business or trade, the general rules of interpreta- tion will apply, and pioof to show their special meaning will ho. received.** If the terms of the bond are doubtful and equivocal, and it is clear that some liability is intended, proof as to the construction was held ttat proof was inadmissible cuted, the impression, certainly, is to show this mistake. that the instrument is so far defect- 4T Oregon Railway & Navigation ive that it is null. But we are Co. vs. Swinburne, 22 Ore. 574; 30 bound to assume that the parties Pac. 322. intended the instrument to be ef- *8 Mumford vs. Memphis & C. Ry. fectual, not nugatory. And if what Co., 70 Tenn. 393. was intended as the condition may See also Franklin Ave. Sav. In- be ascertained from the terms, read stitute vs. Board of Education, 75 in connection with the circumstances Mo. 408; United States Printing & under which, and the purposes for Lithograph Co. vs. Powers (N. Y.), which, as shown by those circum- 135 J^"- Ji- ^^0. stances, the bond was executed, it Longfellow vs. McGregor, 56 , J , . , .. Minn. 312; 57 N. W. 926. An ob- must be sustained." jection was made to this bond that *»XMUg vs. Davidson, 101 N". C. it was so far defective in expression i^Q; 7 S. E. 758; Hatch vs. Doug- as to he a nullity and parol proof was admitted m explanation. The ' „ , , „ Court said : "On a first readinsr, But see Gatchell vs. Morse, 81 Me. without reference to any of the cir- 205; 16 Atl. 662. cumstances under which it was exe- 204 THE LAW OF SUEETYSHIP given the contract by the parties themselves is admissible in aid of interpretation. This is the general doctrine of construction m written instru- ments, and no reason is apparent why it should not apply to a bond of indemnity.^" Parol proof to show a fraud is always admissible where the fraud is by the procurement, or with the knowledge of the obligee. The delivery of the bond without the signature of a co-surety, where the surety signs upon the condition that it shall not be de- livered until the co-surety signs, is a fraud which can be shown by parol. °' £129. Commencement and duration of liability upon a bond. Resort must be had to the language of the bond itself, to de- termine the time within which defaults must occur, in order that they may be covered by the undertaking. The bond will not be retroactive unless the contract so stipulates; it may be unlimited in duration or expire at a definite time, depending upon the language of the instrument. In general a bond is not in force until delivered and ac- cepted,^' but where the bond recites the date from which it is in force, such recital will govern, although not delivered until a later date. Thus where a bond recited that it was made June 15th, and that it was to continue in force 12 months from that date, al- though not delivered and accepted until July 29th, it was held to cover defaults occurring before delivery.'' 50 Chapman vs. Bluck, 5 Seotts District of Columbia vs. Gallaher, Rep. 515; Burgess vs. Badger, 124 124 U. S. 505; 8 S. Ct. 585. 111. 288; 14 N. E. 850; Dwelley vs. 6i McCulloch vs. McKee, 16 Pa. Dwelley, 143 Mass. 509; 10 J?T. E. 289. A claim of illegality in the 468 ; Thompson vs. Prouty, 27 Vt. consideration for a bond, may be es- 14; Dwenger vs. Geary, 113 Ind. tablished by parol. 106; 14 N. E. 903. Luce vs. Foster, 42 Neb. 818; 60 The construction which the par- N. W. 1027. ties themselves put upon a written '2 Hyatt vs. Grover & Baker S. M, contract should prevail, even against Co., 41 Mich. 225 ; 1 N. W. 1037. its literal meaning. 53 Mtna, Life Ins. Co. vs. Ameri" J'EIVATE OBLIGATIONS. 205 "Where the bond recites that the principal will perform his duties as agent, and pay over all money whicjh oomes into his hands, the sureties will be liable for his default in paying over money which he had previously collected, and which he had on hand at the time the bond went into effect."* Where an agent, prior to the giving of a bond, misappro- priates funds of his principal, and during the period covered by the bond, collects money due his principal and reports it as coming from the debtors whose collections he had previously converted, and the principal so credits it, without knowledge of the fraud, it will be deemed a defalcation under the bond.^° If the appointment to the ofSoe or agency is for a limited time, the liability upon the bond will be limited to the same pe- riod, although the language of the bond contains no words of lim- itation. Thus where a Treasurer was appointed for one year, and gave bond for the faithful discharge of the duties of his office, with- out specifying any time the bond was to run, it was held that no liability attached under the bond for defaults committed under subsequent re-appointments to the office.'" Where it does not appear, either from the by-laws of the Cor- poration or from the contract of appointment, that the office or Agency is annual, and the bond in terms does not fix a limit. can Surety Co., 34 Fed. Rep. 291; N. W. 532; Rankin vs. Tygard, 198 Supreme Council Catholic Knights Fed. 7»5; 119 C. C. A. 591; Ulster ■vs. Fidelity & Casualty Co., 63 Fed. County Sav. Bank vs. Ostrander Eep. 48. 163 N. Y. 430; 57 N. E. 6-27; Ida Contra — First National Bank vs. County Sav. Bank vs. Seidensticker ■---s, 69 Vt. 12; 37 Atl. 231; 128 Iowa 54; 102 N. W. 821 ; Blades Bullion Lumber Co. vs. Barnard, vs. Dewey, 136 N. C. 176; 48 S E 131 Wis. 284; 111 N. W. 483. 627. s* Mutual Life Ins. Co. vs. Wil- Contra — A bond conditioned for cox, 8 Biss. 197. the proper performance by a cashier 5s American Boniding & Trust Co. of his duties "for and during all the vs. Milwaukee Harvestei- Co., 91 Md. time he shall hold the said office," "I'Vi: 48 Atl. 72. binds the sureties for all such time, Comira— State vs. Atherton, 40 irrespective of the fact that he is ^°- 201. reappointed at the beginning of eaej" 58 Welch vs. Seymour, 28 Conn. vear. Nestervell vs. Mohrenstsoher, 387; Mutual Loan & Bldg. Assoc. 76 Fed. 118; 22 C. C. A. 93. ■vs. Miles, 16 Fla. 204; Savdngs Bank See also Mutual Bldg. & Loan Ais- of Hannibal vs. Hunt, 72 Mo. 597; soc. vs. McMullen, 1 Penny (Pa.) Citizens' Loan Assoc, vs. Nugent, 40 431. In this case the bond recited N. J. L. 215; First National Bank that it was given to secure the faith- vs. Samuelson, 118 N. W, 81; 82 ful performance by the Treasurer of 206 THE LAW OF SURETYSHIP. the sureties will be liable so long as the employment or ofSce continues.^' If the bond covers the duties of the ofSce or employment for the time for which the principal is then ekcted, and "So long as he shall continue in of&ce," it will cover all future re-elec- tions,"^ but the tenure must be continuous. A vacancy in the employment, followed by a re-election will release the sureties from liability for default under the last election.^" §130. Bonds of general indemnity. A bond to secure the faithful performance of duty in a posi- tion of trust, operates as a security against all loss resulting from the misconduct or want of care of the principal. "Faithful" performance of duty includes not only honesty, but also the skill and diligence implied as a condition of all con- tracts of employment.^"" Although the agent or employee acts with the utmost fidelity, in the sense that he does not convert ■ or misappropriate the funds of the obligee, he is nevertheless unfaithful within the meaning of bonds of general indemnity, if by his indifference to his trust, or by his negligence, a loss occurs."" In a bond insuring an employer against losses sustained by reason of conduct of an employee constituting embezzlement, the word "embezzlement" is to be construed broadly in its general and popular sense, rather than in a narrow and tech- nical spirit with specific reference to the local statute; and a loss occasioned by the employee's speculating on the market in the name of the employer, but without his knowledge or con- sent, is within the protection of the bond."'"' If the trust funds are taken from him by violence, not in- duced by his want of care, or by inevitable accident, the sureties will not be liable."^ his fhitifes during his "continuanee 59(i Citizens Trust, etc., Co. vs. in office," but it was held to be lim- Globe, etc., Fire Insurance Co., 229 ited to one year, since the charter Fed. 326; Ann. Cas. 1917C, 416, and By-laws of the Association re- note, "Act or Default of Employee quired the Treasurer to he elected Covered by Fidelity Bond or Insur- annually. O'Brien vs. Murphv, 175 ance." Mass. 253 ; 56 N. E. 283. " so Union Bank vs. Forrest, 3 See also iState vs. Mann, 34 Vt. Cranch (C. C.) 218; Barrington vs. 371. Bank of Washington, 14 iSerg. & R. 57 Union Bank vs. Ridgelv, 1 Har. 405 ; Frink vs. iSouthern Express & Gill (Md.) 324; DedhamBank vs. Co., 82 Ga. 33; Engler vs. People's Chickering, 3 Pick. 335; Merchants Fire Insurance Co., 46 Md. 322; Bank vs. Honey, 58 Kan. 603; 50 Citizens' Bank vs. Wiegand, 12 Pac. 871; Wajpello State Savings Phila. Rep. 406. Bank vs. Colton, 110 N. W. 450. SO" Mitchell Grain & S. Co. vs. 68 People's Bldg. & Loan Assoc. Maryland Casualty Co., 108 Kan. vs. Wroth, 43 N. J. L. 70; Ulster 379; 105 Pac. 978; 16 A. IL. E. County Savings Bank vs. Young, 161 1488, 1493. note. N. Y. 23; 551 N. E. 483. ei Huntsville Bank vs. Hill, 1 69 Middlesex Mfg. Co. vs. Law- Stew. (Ala.) 201; Chicago, B. & rence, 83 Mass. 339; Coombs vs. Q. Ry. vs. Bartlett, 120 111. 603; Harford, 99 Me. 426; 59 Atl. 529; 11 N. E. 867; B. & O. Ry. vs. Jaxjk- Lexington & West Cambridge R. R. son, 3 Atl. Uep. (Pa.) iOO. vs. Elwell, 90 Mass. 371. PRIVATE OBLIGATIONS. 207 Neither will the sureties b« liable for defaults committed by subordinates of the principal, where such subordinates are ap- pointed by the obligee."^ General indemnity for faithful performance of duty includes more than the prescribed duties of the employment. If the agent or employee acts outside the scope of his em- ployment, but under color of his office or position, and loss re- sults to the obligee, the sureties will be liable."' Where the law prohibits an officer of the bank from borrowing from his own bank, it is a violation of his official duty to receive such loan, and a failure to repay the loan so made, creates a lia- bility against the sureties on his bond."* §131. Bonds to secure building contracts, with covenants for the payment of labor and material claims. In general a bond to secure the performance of a building contract, with a covenant to pay all labor and material claims, will bind the surety to pay such claims, and recovery may be had at the suit of the claimants themselves."'"* The obligee in a building contract has a right not merely to require his building to be completed in a manner and at the tim« «2 Chicago & A. R. R. Co. vs. Hig- gins, 58 111. 128. In La Rose vg. Logansport Nat. Bank, 102 Ind. 332; 1 N. E. 805, the funds were in charge of the cashier, but other officers of tlie bank had the right of access to the fuiids, and it was held that the sureties of the cashier were not liable for the mis- conduct of the other officers. 63 German Bank vs. Auth, 87 Pa. 419; Rochester City Bank vs. El- wood, 21 N". Y. 88; Walden Nat. Bank vs. Birch, 130 N. Y. 221; 29 N. E. 127; Pendleton vs. Bank of Kentucky, 1 T. B. Mon. 171; Hum- boldt Savings & Loan Society vs. Wennerhold, 81 Cal. 528; 22 Pao. 020. But see iSperry vs. Dransfield, 2 New Zealand (S'. C.) 319, where it is held that a surety upon a fidelity bond given by an officer of a society is not liable for the conversion of funds which, under the rules of the society, should not have been paid to the officer. MMcSbane vg. Howard Bank, 73 Md. 135; 20 Atl. 776. 65 See post, Sfec. 142. iSepp vs. MeCann, 47 Minn. 364; 50 N. W. 246; Salisbury vs. Kei- gher, 47 Minn. 367: 50 N. W. 245; Lyman vs. City of Lincoln, 38 Neb. 794: 57- N, W.'531: Doll vs. Crume, 41 Neb. 655; 49 N. W. 806; King vs. Downey, 24 Ind. App. 262; 58 N. E. 680; American Surety Co. vs. Raeder, Assignee, 15 O. C. C. 47; Henry vs. Ankrim, 39 Law Bui. (O.) 78; United States vs. Burg- dorf, 13 App. D. C. 506; St. Louis vs. Von Publ, 133 Mo. 561 ; 34 IS. W. 843 ; Jordan vs. Kavanaugh, 63 Iowa 1.52; 18 N. W. 851; Baker vs. Bryan, 64 Iowa 561; 21 N. W. 83; Indemnity Co. vs. Granite Co., 100 0. S. 373; 126 X. E. 405; State, ex rel., Marble Cliff Quarries Co. vs. Watts, 100 0. S. 380;, 126 N. E. 407; Alexander Lumber Co. vs. Aetna Co., 296 111. 500; 129 N. E. 871; Forburger iStone Co. vs. Lion Bonding & iSurety Co., 103 Neb. 202; 170 N. W. 897; 171 N. W. 288; Equitable Surety Co. vs. U. S., 234 U. S. 448; Concrete iSteel Co. vs. Illinois iSurety Co., 163 Wis. 41; 157 N. W. ,543. Contra — Fosmire vs. National Surety Co., 229 N. Y. 44; 127 N. E. 472; First M. E. Church vs. Isen- berg, 246 Pa. St. 221 ; 92 Atl. 141. But see Wilson vs. Whitmore, 92 Hun 466 ; 36 N. Y. iS. 550. Affirmed 1.57 N. Y. 693; 51 N. E. 1094. Parker vs. .Teffery, 26 Ore. 186; 37 Pac. 712. Holding that the rule giving to third parties, the benefit of a contract to which they are not parties, is limited to those contracts which havel for their primary object the benefit of a third person. 208 THE LAW OF SURETYSHIP. agreed upon, but also that it shall be delivered to him free from the liens of those who furnish labor and material in its con- struction. See also IS'imaori vs. Brown, 68 N. Y. 355; Durnherr vs. Rau, 135 N. Y. 219; 32 N. E. 49; Electric Appli- ance Co. vs. U. S. Fidelity & Guar- anty Co., 110 Wis. 434; 85 N. W. 648. In City of Philadelphia vs. Mad- den, 23 Pa. Co. Ct. Rep. 39, it was held that a Municipality has no right to require a contractor to fur- nish a bond, conditional upon the payment of lalbor and materials by the Contractor, and that such bond can not be enforced against the surety. iSee also Kansas City Sewer Pipe Co. vs. Thompson, 120 Mo. 218; 25 S. W. 522. The holding in this case is based upon the absence of specific authority in the city charter to make a contract for the benefit of a third party. "As the city was not liable for the material and no lien could be asserted against her by plaintiff, it is very clear that it was not essential to the exercise of its charter right to construct sewers, that it should have the implied pow- er to contract for plaintiff's bene- fit." See also City of Kansas vs. O'Con- nell, 99 Mo. 357; 12 S. W. 791; Breen vs. Kelly, 45 J'linn. 352; 47 N. W. 1067; Park Bros. & Co. vs. Sykes, 67 Minn. 153 ; 69 N. W. 712 ; Becker vs. Keokuk Water Works, 79 Iowa 419; 44 N. W. 694. As to the authority of a munici- pality to require a contractor to give a bond conditioned upon the pay- ment of labor and material claims. See remarks of Cooley, G. J., in Knapp vs. iSWaney, 56 Mich. 345; 23 N. W. 162. The Act of Congress of August 13, 1894, ch. 280, amended by Act of February 24, 1905, ch. 778, 33 ■Stat. L. 811 (U. S. Comp. iSt. 1916, iSec. 6923), provides that a con- tractor on government works shall give the usual surety bond with the additional obligation that he shall promptly pay all persons supplying labor or materials in the prosecu- tion of the work. The Act then provides for a suit on this bond by such materialmen, stating that the suit shall be brought in the federal court for the district in which the contract was to be performed "and not elsewhere." The government may bring suit within six months from the date of completion of the contract, during which period no suit may be! instituted by material- men, though they may intervene in any suit brought by the govern- ment. Only one action is to be brought, -all other claimants inter- vening in that action. Brogan vs. National Surety Co., 246 U. S. 257, The purpose of the amendment was merely to secure to the United States preference over others in the satisfaction of its claim against the contractor. Illinois Surety Co. vs. Peeler, 240 U. S. 214, 218. It was pointed out in Mankin vs. Ludowici- Celadon Co., 215 U. iS. 533, 538, that "In respect to the condition of the bond required to be given, the lan- guage of the amended act is pre- cisely the same as, that contained in the act of August 13, 1894;" and in Hill vs. American Surety Co., 200 U. S. 197, 201, that "In respect to the persons entitled to the benefit of the bond there has been no mate- rial change in the act." The Supreme Court has repeatedly refused to limit the application of the act to labor and materials di- rectly incorporated into the public work. Thus in Title Guaranty & Trust Co. vs. Crane Co., 219 U. 8. 24, 34, the claims for which recovery was allowed under the bond included not only cartage and towage of material, but also claims for draw- ings and patterns used by the con- tractor in making molds for castings which entered into the construction of the ship. In United States Fidel- ity Co. vs. Bartlett, 231 U. S. 237, where the work contracted for was building a breakwater, recovery was allowed for all the labor at a quarry opened fifty miles away. This in- PRIVATE OBLIGATIONS. 209 The bond given to secure the owner in these rights may as- sume the form of an undertaking to complete the building if the contractor does not, and to pay the labor and material claims if eluded, as the record shows, the labor not only at men who stripped the earth to get at the stone and who removed the debris, but car- penters and blacksmiths who re- paired the ears in which the stone was carried to the quarry dock for shipment; and who repaired the tracks upon which the cars moved. And the claims allowed included also the wages of stablemen who fed and drove the horses which moved the cars on those tracks. In Illinois Surety Co. vs. John Davis Co., 244 U. IS. 376, recovery was allowed not only for the rental of cars, track and other equipment used by the contractor in facilitating his work, but also the expense of loading this equipment and the freight paid thereon to transport it to the place where it was used. As shown by these cases, the act and the bonds given under it must be construed liberally for the pro- tection of those who furnish labor or materials in the prosecution of public work. Questions of liability to pay in- terest under bond to secure payment for labor and materials, furnished under construction contract with United States, are determinable by law of iState in which contract and bond were made and to be per- formed. 111. Surety Co. vs. John Davis Co., 244 U. iS. 376. See also 92 Central Law Journal 227, "Ex- tent of Liability on Surety Bonds Given by Contractors for U. S. Gov- ernment Work." United States vs. National Surety Co., 34 C. C. A. 526; 92 Fed. Rep. 549, Thayer, J.: "It is a familiar rule of law that the contract of a surety must be strictly construed, and that it can not be enlarged, by construction, and that when a bond, with sureties, has been given to se- cure the performance of a contract, and the principal in the bond and the person for whose benefit it was given make a material change in the contract without the consent of the surety, the latter is thereby dis- charged. For present purposes, it may be conceded that the finding of the lower court in the case at bar discloses such a modification of the original contract between Pros- ser and the United iStates as would fall within the rule last stated, and release the defendant company from its liability, if the United States was suing for its own benefit for a breach of some provision of the con- tract, the due performance of which the bond was intended to secure . . . The condition for the bene- fit of persons who might furnish materials or labor is carefully pre- scribed. Obviously, therefore. Con- gress intended to afford full protec- tion to all persons who supplied materials or labor in the construc- tion of public buildings or other public works, inasmuch as such per- sons could claim no lien thereon, whatever the local law might be, for the labor and materials so supplied. There was no occasion for legislation on the subject to which the act re- lates, except for the protection of those who might furnish materials or labor to persons having contracts with the government. The bond which is provided for by the act was intended to perform a double func- tion, — in the first place, to secure to the government, as before, the faithful performance of all obliga- tions which it contractor might as- sume towards it; and, in the second place, to protect third persons from whom the contractor obtained mate- rials or labor. Viewed in its latter aspect, the bond, by virtue of the operation of the statute, contains an agreement between the obligors therein and such third parties that they shall be paid for whatever labor or materials they may supply to enable the principal in the bond to execute his contract with the United iStates. The two agreements which the bond contains, the one for 210 THE LAW OP SUEBTySHIP. the contractor defaults m that respect. Or it may take the form of an obligation to save the owner harmless from all loss result- ing from a breach by the contractor of any of the covenants of the building contract. In the one case, it is an obligation to pay such a sum of money as is necessary to carry out in full all the covenants of the building contract, and in the other, it is an obligation to pay such damages as are ascertained to result from the default of the contractor, without regard to the specific performance of his contract.^'" The undertaking to pay labor and material claims is enforce- able, whether mechfinic's liens representing such claims are per- fected or not, whereas, an obligation to save harmless from such claims only becomes a liability when these claims result in a lien upon the property. If the owner pays labor and material claims to prevent liens the benefit of the government, ami the one for the benefit of third per- sons, are as diatinct as if they were contained in separate instruments, the government's name being used as obligee in. the latter agreement merely as a matter of convenience. In view of these considerations, we are of the opinion that the sureties in a bond, executed under the act now in question, cannot claim ex- emption from liability to persons who have supplied labor or material to their principal to enable him to execute his contract with the United States." Dewey vs. State ex rel. McOol- lum, 9i Ind. 173; Conn vs. State ex rel. Stutsman, 125 Ind. 514; 25 N. E. 443; Doll vs. Grume, 41 Neb. 655; 59 N. W. 806; Kaufman vs. Cooper, 46 Neb. 644 ; 65 N. W. 796 ; StefFes vs. Lemke, 40 Minn. 27; 41 N. W. 302. It is said that the double func- tion contemplated bv this statute in- volves a double linbility on, the bond, and that each obligee can recover the full amount of the penalty from the ' In'Grifiith vs. Rundle, 23 Wash. 453; 63 Pac. 199, a government con- tractor being in default, the surety completed the contract and expended In so doing a sum in, excess of the penalty on the bond, and was there- after sued upon the bond by ma- terial and labor claimants, and re- oovery was allowed. The Court said: "The practical effect of the statute, and others of similar character, in a, number of states, seems to be to confer a special lien in favor of such persons who furnish labor and ma- terial, and to substitute the bond in the place of the public building as a thing upon which the lien is to be charged. Such liens evidently appear, from an inspection of the current legislation, to be favored, and the Courts have usually adonted a liberal rule of construction in their enforcement." 05(1 \ , eightman vs. National Trust Co., 208 Pa. 44fl; 57 Atl. 879. In this case the bond was given to a mortgagee to indemnifv him against loss or damage resulting from the failure of the principal to erect cer- tain buildings upon the mortgaged premises and to make certain street improvements, and it is held that the bond created no liability to pay for the cost of erecting the build- ings or installing the street improve- ments — ^but merely a liability to pay the deficiency caused by the impair- ment of the security because of the failure to perform the contract. PRIVATE OBLIGATIONS. 211 being perfected, the sureties upon the bond to "save harmless from liens," or to turn over the building "free from liens for labor and material," will not be liable. The obligee by pre- venting the happening of the condition which forfeits the bond, has deprived himself of recourse to the bond, since by strict con- struction there has been no breach of the terms of the bond, and furthermore, the obligee cannot show to a certainty that the labor or materialmen would have perfected ^heir liens within the time limited by law, even if their claims had not been paid."" Where the bond recites that it is to indemnify the owner against liens and "all money which he may pay to other persons on account of the work, ' ' it was held that the sureties were liable for advancements made by the owner in payment of labor and material to prevent liens."' A bond given to a mortgagee to indemnify him against liens which may arise in the construction of a building upon mort- gaged premises, was held not to be an undertaking for the benefit of lien holders, and enforceable by them, but was limited to such damages as result to the mortgagee by reason of the liens, and that if the security was not impaired, there would be no liability upon the bond even though the liens attached."' A bond merely to save the owner harmless against liens is not available to the lien holders."' §132. Alteration of the principal contract as a defense to sure- ties upon the bond. A material alteration in a contract secured by bond will re- lease the bond. Sureties cannot be held for a default in the per- formance of duty, where such duty is not in terms specified, either in the undertaking itself, or by reference to the main con- tract, and the equities of suretyship will not permit alteration of these duties, without the consent of the surety, except upon the condition of his discharge. 66 Bell vs. Paul, 35 Neb. 240; 52 cover there must be involved as an N. W. 1110. essential element the right to re- Where the condition of the bond cover damages which have or may is against actual loss, the plaintiff be suffered by reason of the failure not having sustained any loss can to pay the claims. Village of not recover. Sheard vs. U. S. Fidel- Argyle vs. Plunkett, 226 N. Y. 306 ; ity & Guaranty Co., 58 Wash. 29; 124 N. E. 1. 107 Pae. 1024. But if the bond is «' Oberbeck vs. Mayer, 59 Mo. against liability, outstanding claims App. 289. not being paid are a liability even 68 American Bldg. & Loan Assn. though no lien has been filed. iStuart vs. Waleen, 52 Minn. 23; 53 N. W. vs. Carter, 79 W. Va. 92; 90 S. E. 867. 537; Trinity Parish vs. Aetna In- 69 Stetson & Post Mill Co. vs. demnity Co., 37 Wash. 515; 79 Pao. McDonald, 5 Wash. 496; 52 Pac. 1097. To enable the obligee to re- 108. 212 THE LAW OF SUEETYSHIP. Such a rule is to be upheld, either upon the ground of in- crease of the risk to the surety, or that the contract so changed was not the one which the Surety agreed to stand good for, and therefore he should be released, whether the risk has been in- creased or not.'" Changes in a building contract which impose additional duty upon the contractor, and which are not anticipated by terms of general waiver in the bond, will discharge the sureties.''^ Bonds to secure the faithful performance of duty by persons in a position of trust, will be released by a change in the office or employment, whereby new contract relations are assumed be- tween principal and obligee. Such as where an Assistant Bookkeeper in a. Bank gives a bond, and subsequently is promoted to the position of Discount Clerk. Defalcations in the latter employment, although within the period covered by the bond, were held not to be a breach of the contract.'" 70 Ante, Sec. 72. A corporation engaged in the busi- ness of suretyship for profit can not successfully defend a. suit merely by showing a change in the con- tract, whether beneticial or other- wise, as in the rule of ordinary suretyship, but must prove tliat the change is material and prejudicial. City of Philadelphia vs. Ray, 266 Pa. 345; 109 Atl. 689. Tl Judah vs. Zimmerman, 22 Ind. 388. 72 Baltimore First Nat. Bank V9. Gerke, 68 Md. 449. ' See also American Telegraph Co. vs. Lennig, 139 Pa. 594; 21 Atl. 162; Garnett vs. Farmers' Nat. Bank, 91 Ky. 614; 16 S. W. 709; Manufacturers' Nat. Bank vs. Dick- erson, 41 N. J. L. 448; .National Mechanics' Banking Assn. vs. Conk- ling, 90 N. Y. 116. Here the language of the bond was "iShall faithfully fulfill and discharge the duties committed to and the trusts reposed in him as such bookkeeper and shall also faith- fully'fuliill and discharge the duties of any other office, trust or employ- ment, relating to- the business of said association which may be as- signed to him, or which he shall undertake to perform." This was construed to be limited to the duties of the principal as bookkeeper, or in any other position of trust in the bank which he might temporarily perform while holding the position of bookkeeper, but not to include his faithful performance of duty as Receiving Teller to which he was promoted. Earl, J: : " The sureties under- took for the fidelity of their prin- cipal only while he was bookkeeper; but if while bookkeeper the duties of any other office, '.rust or employ- ment relating to the business of the bank were assigned to him, their ob- ligation was also to extend to the discharge of those duties. While bookkeeper he might temporarily act as teller or discharge the duties of any other officer during his tem- porary illness or absence, or he might discharge any other special duty assigned to him, and while he was thus engaged the bank was to have the protection of the bond. PRIVATE OBLIGATIONS. 213 But it is not a defense to the surety that the risk is increased by additional duties imposed on the principal as an incident to the enlargement of the business.'^ Neither will the sureties be discharged by an addition of new duties which do not modify or abrogate the duties recited in the bond, nor interfere with their due performance.'* It has been held that where an agent executed a bond to in- demnify his principal against loss while acting as agent in a cer- T'here are no words binding the sureties in case of the appointment of their principal to any other of- fice. They might have been willing to be bound for him while he was bookkeeper, or temporarily assigned to the discharge of other duties, but yet not willing to be bound if he should be appointed teller or cash- ier and as such placed in the pos- session or control of all the funds of the bank A surety is never to be implicated beyond his specific engagement, and his liability is always strictissimi juris and must not be extended by construction.'' Detroit 'Savings Bank vs. Ziegler, 49 Mich. 157 ; 13 N. W. 496 ; North- western Nat. Bank vs. Kean, 14 Phila. Rep. 7. See also Union Dime Savings In- stitute vs. Neppert, 51 Hun 640; 21 N. Y. S. R. 723. Where the language of the bond was, " shall faithfully and honestly discharge his duties as such Clerk, or in whatever capacity he may serve said Bank." This recital was deemed broad enough to cover the defalcations of the principal in his office as teller to which he was promoted. To the same effect see Fourth Nat. Bank vs. Spinney, 120 N. Y. 560; 24 N. E. 816. The distinction has been made in many cases between a promotion to a higher oflSce, and a temporary as- sumption of the duties of another office. In the latter case, the sure- ties upon the bond will be liable for defalcations of the principal while temporarily discharging the duties of another. Johnson vs. Eaton Milling Co., 18 Col. 331; 32 Pac. 825;, Third Nat. Bank vs. Owen, 101 Mo. 558; 14 S. W. 632 ; Wallace vs. Exchange Bank, 126 Ind. 265; 26 N. E. 175. 73 Eastern Railroad Co. vs. Loring, 138 Mass. 381. In this case the principal was a Ticket Agent, and the Railway extended its connec- tions, thus increasing the business of the office. This was held not to be an alteration of the contract of employment. But see Grocers' Bank vs. King- man, 16 Gray 473, where an in- crease in the capital stock of the bank from $300,000 to $750,000 was considered as being a groiind for discharging the sureties of the cash- ier by reason of the increase of his responsibilities. The principal of this case is distinctly repudiated in Lionberger vs. Krieger, 88 Mo. 160. TiHarrisburg Sav. & Loan Assn. vs. U. S. Fidelity & Guaranty Co., 197 Pa. 177; 46 Atl. 910. 214 THE LAW OF SUEETYSHIP. ' tain territory that the sureties will not be liable for his default* in a new territory assigned to him.'"' A change in the amount of the compensation of the principal, while amounting to an alteration in the main contract, in a sense, is not, however, such an alteration as comes within the rule which discharges the surety.'* Where a bond recites the salary of the office or appointment, a reduction of the salary without the consent of the surety, will discharge the latter." §133. Alterations in bond as a defense to the sureties. Alterations in a bond, after delivery, without the consent of the surety, will discharge the latter, if such alterations are ma- terial. The test of materiality is whether the liability under the bond has been increased or diminished. Even alterations which are beneficial to the surety will vitiate the bond. This rests mainly on grounds of public policy, which requires that the integrity of written instruments be preserved, by making the penalty suffi- cient to deter those having the custody of such writings, and who are the beneficiaries, from mutilating or in any way changing their identity.'* There is also a sufiicient justification for the rule in the in- herent equities of suretyship, whereby the obligations are strict- ly construed, and the propiisor held only upon the exact terms of .his undertaking.'" '6 Wheeler & Wilson Mfg. Co. vs. ble only so long as the overseer was Brown, 65 Wis. 99; 25 N. W. 427; continued at the same salary." White S. M. Co. vs. Mullins, 41 Amicable Mut. Life Ins. Co. vs. Mich. 339; 2 N. W. 196. Sedgwick, 110 Mass. 163. 70 Frank vs. Edwards, 8 Welsh. 'T North Western R. R. Co. vs. H. & G. 214, Parke, B.: "If the Whinray, 10 Ex. 77. sureties had thought that the amount ^s Ante Sec. 79. of the salary was an essential in- '8 Anderson vs. Bellenger, 87 Ala. gredient in the contract, they ought 334; 6 South. 82, McGlellan, J.! to have taken care to have had a " The contract of suretyship must be stipulation inserted in the condition strictly construed in favor of the of the bond, that they would be lia- surety. His obligation is volun- PRIVATE OBLIGATIONS. 215 Changes in a bond which are not material do not release the sureties, as where words are added for the purpose of a more complete description of the subject matter of the bond,'" or an extension of the language to include specifically that which is already implied in the tenor of the bond.^^ An interlineation, made by a stranger is a mere act of spolia- tion, and will not invalidate the bond,*^ Alterations apparent upon the face of the bond will be pre- sumed to have been made before delivery.*^ A restoration of the instrument to its original condition will not revive the liability against the surety, except where the al- teration was without fraudulent intent. In such cases the bond may be restored and the surety held.** §134. Surety upon bond estopped from denying the recitals of the bond. A party to a contract cannot be permitted to deny, or offer proof to controvert that which he has affirmed in the contract. Estoppel is an obstacle imposed by law to prevent one from denying the truth of a statement which he has led another to be- lieve is true, and who has acted upon that belief. tary, without any consideration si Western Bldg. & Loan Assn. vs. moving to him, without benefit to Fitzmaurice, 7 Me. App. 283. him, entered into for the aeeom- «2 White Sewing Mach. Co. vs. J i- -v.- ■ ■ 1 A Dakin, 86 Mich. 581 ; 49 N. W. 583- modation of his principal, and gen- „ , , ' ' ^ ^\, ^ r^, ,,. Schlageekvs. Widbfl,lm, 59Neb. 541; erally, also, for that of the obligee; „ and courts see to it that his liabil- 33 Xander vs. Coramoewealth, 102 ities thus incurred are not enlarged Pa. 434. beyond the strict letter of his under- But see Nesbitt vs. Turne". 155 taking. To the extent, and in the Pa. 429; 26 Atl. 750, where thb aJ- manner, and under the circumstances teration was of such a, characte) pointed out in his obligation, he is ^^^^ '* '"'^^ held to raise the pre- bound, and no further. His con- sumption of an alteration after de- tract cannot be changed in any re- „, , ,„, ,, ,, ,. . Westmoreland vs. Westmoreland, spect. Whether an alteration is or g^ Ga. 233; 17 S. E. 1033; Dangei IS not to his benefit, is not open to ^^ ^evy, 1 Idaho 722; Brand vs. inquiry." Johnrawe, 60 Mich. 210; 26 N. W, 80 Rowley vs. Jewett, 56 Iowa 333, 492; 9 N. W. 353. 84 Rogers vs. Shaw, 59 Cal. 260. 216 THE LAW OP SUBETYSHIP. In applying the doctrine of estoppel, it is -wholly irrelevant as to whether the recitals are true or not, if it is shown that the representation has in fact been acted upon. A surety upon a bond is estopped from denying that the con tract between the principal and obligee has been duly executed, where such execution is recited in the bond, even though there is no binding contract by reason of the fact that the parties failed to sign the same.^^ Where the bond recites that the principal has been appointed as agent, or to some other position of trust, the surety will be estopped from denying the appointment; ^° and where the date of the agency is set out in the bond, it is conclusive upon the surety, and it cannot be shown that the agency did not go into effect on that date, whatever the fact may be." Again, where a bond recited the words, " Sealed with our seals " it was shown that the seal was affixed after the signing, and without the authority of the obligor, and the defense was that the adding of the seal constituted a material alteration, it was held that the surety was estopped from denying that he did not himself affiLx the seal.^* But if the seals have not in fact been affixed before delivery, a recital in the bond that it was sealed by the surety will not operate as an estoppel against showing that it was delivered un- sealed. '^ "Where a bond recites that the contract had been executed as of one date, the sureties are estopped from asserting that the contract was actually signed on some other date.^"" If the instrument was executed by a Corporate name, the obligor is estopped from denying the Corporate capacity.^" "Where the recital is immaterial to the object and purpose of 85 Hayden vs. Cook, Si' Neb. 670 ; ss Metropolitan Life Ins. Co. vs. 52 N. W. 165; Price vs. Scott, 13 Bender, 124 N. Y. 47; 26 N. E. 345. Wash. 574; 43 Pa«. 634. Contra— Town of Barnet va. Ab- 8s Phenix Ins. Co. vs. Findley, 59 bott, 53 Vt. 120. Iowa 591 ; 13 N. W. 738; Lionberger 89 State vs. Humbird, 54 Md. 327; vs. Krieger, 88 Mo. 160; State Bank Taylor vs. Glaser, 2 Serg. & Rawle vs. Chetwood, 8 N. J. L. 1 ; Hauen- 502. .stein vs. Gillespie, 73 Miss. 742 : 19 s^o Red Wing Sewer Pipe vs. Don- South. 673: Henrv County vs. Sal- nelly, 102 Minn. 192; 113 N. W. 1. mon, 201 Mo. 136- 100 S. W. 20. so Keen vg. WOiittington, 40 Md. 87 Washington Co. Ins. Oo. vs. 489. Colton, 26 Conn. 42. PKIVATJi OBLIGATIONS. 217 the bond, it does not preclude the party signing from showing the truth.'' If the bond does not speak the truth by reason of fraud, the recitals may be contradicted."" §135. Measure of damages upon breach of the conditions of a bond. The early construction of a bond to secure a private obligation was that the obligee was entitled to a decree in equity directing the obligor to specifically perform the act set out in the bond, with an alternative order, that upon default of such specific per- formance, he be required to pay the sum named as penalty as liquidated damages.'^ It was, however, enacted by statute in England, that in all ac- tions upon bonds, the jiiry should assess the damages caused by the breach, and judgment should be rendered for the penal sum named in the boad, but upon payment of the sum assessed as damages, there should be^ a stay of execution, and the judgment should stand as a security for future breaches."* This Statute was construed to mean that a bond was holden only for the damages actually sustained, without regard to the amount named as penalty ; and it became the rule in equity that nothing should be recovered in an action upon a bond, except the damages shown to have been sustained by a failure to perform the collateral aot."^ The English Common Law construction of this class of bonds, has always been in force in the United States, and whenever the amount of damages sustained by the obligee is capable of ascertainment, and the parties have not expressly declared the penalty to be a liquidated amount, the rule is, 91 Eeed vs. McCourt, 41 N. Y. 436. 95 Hardy vs. Bern, 5 T. R. 540. 36;' m^'n'^wI'sO^^''^'' "'^ ^'''^' Beckham vs. Drake, 2 H. L. 579, But seVlCuriger vs. Joest, 22 Ind. Parke, B. (629) : " That statute in App. 633; 52 N. E. 764; 54 N. E. effect makes the bond a security for "*'■*■ the damages really sustained." reST« It «^« J ^^■. Hurst vs. Jennings, 5 Barn. & son,"l0"Modr'5Y5r'Hobson vs! Tre- Cr. 650; Grey vs. Friar, 15 Q. B. vor, 2 P. VVras. 191. 891. Cases Abr. 18, pi. 8; Parks vs. Wil jn, 10 Mod. 515; Hobson vs. Tre or, 2 P. VVras. 191. 9*8 and 9 Wm. Ill, c. 11, Sec. 8. 218 THE LAW OF S0BETTSH1P. that the amount named in the bond is intended as a mere se- curity fixing the limit of liability, and only so much of the penalty is recoverable as adequately covers the damages sus- tained."" The authorities, both of this country and England, now es- tablish the rule, that a penalty inserted in a bond to secure the performance of a collateral object, is accessory only to the main purpose of the transaction, and if the character of the collateral act is such that compensation can be made in damages for its breach, the recovery must be limited to such damages, and if no injury is shown, nominal damages only are recoverable."' All damages resulting from the breach of the bond may be »6 Davis vs. Gillett, 52 N. H. 126; Rawlings vs. Adams, 7 Md. 26; Wright vs. Wright, 49 Mich. 624; 14 N. W. 571; Longfellow vs. Mc- Gregor, 61 Minn. 494; 63 N. W. 1032; Hirt vs. Hahn, 61 Mo. 496; People's Bldg. & Loan Assn. vs. Wroth, 43 N. J. L. 70. City of Aberdeen vs. Honey, 8 Wash. 251; 35 Pac. 1097. Where the bond is to secure the payment of an annuity, it was held that the damages recoverable upon a breach consist of the payments in default, and not the penal sum named in the bond. Cairnes vs. Knight, 17 O. S. 69; Salo vs. Pacific Coast Casualty Co., 95 Wash. 109; 163 Pac. 384; L. R. A. 1917D, 613, note. So also where the bond is to secure the payment of premiums upon, a policy of life insurance, the damage for the breach was considered as the amount of the unpaid premiums, and not the value of the policy which lapsed by reason of the non- payment. IScott vs. Phillips, 140 Pa. 51; 21 Atl. 241. But in Girard vs. Cowperthwait, 21 N. Y. S. 1092, the view was talcen that a non-payment of premiums re- sulting in a lapse of the policy raises an obligation upon the bond for the full amount of the policy, up to the amount of the stipulated pen- alty named in the bond. 97 Tate vs. Booe, 9 Ind. 13; Raw- lings vs. Adams, 7 Md. 26; Linder vs. Lake, 6 Iowa 164; Fidelity & Deposit Co. vs. Colvin & Jackson, 83 Mo. App. 204; Wallis vs. Keeney, 88 111. 370; Karr vs. Peter, 60 111. App. 209; Shattuck vs. Adams, 136 Mass. 34 ; Sprague vs. , Wells, 47 Minn. 504; 50 N. W. 535; Turck vs. Marshall Silver Mining Co., 8 Col. 113; 5 Pac. 838. State vs. Atherton, 40 Mo. 209. In this case the principal was in default as an officer of the bank at the time of the execution of his bond. He subsequently falsified his accounts in order to conceal his de- falcation. This was a technical vio- lation of his bond, but of itself no damage to the bank, as the defalca- tion had already been committed^ and it was held that the obligee could only recover nominal damages. Contra — Taylor vs. Mygatt, 26 Conn. 184. Holding that not even nominal damages could be recovered for breach of a bond where no in- jury is show" PRIVATE OBLIG4.riONS. 219 recovered, although such damages accrue in part after the commencement of the action."' If the parties intend the sum named in the bond to be treated as liquidated damages, such ascertained intention will be enforced."" Whether or not the parties to a written instrument intend the sum named as damages for its violation shall be consid- ered as liquidated or as a penal security, depends upon the terms used to express the agreement, the circumstances sur- rounding the making of the contract, and the subject matter of the contract, all of which are proper elements of proof.^°° If the purpose of the parties to a bond in fixing the amount of damages to be paid is merely to secure prompt performance of the agreement the bond will be treated as a penal one, and no more than actual damages will be recoverable on a breach.^""" Stipulations in building contracts for the payment of a fixed sum per day for each day of delay beyond the date agreed upon in the contract, amount to liquidated damages, and may be recovered without regard to the actual loss resulting from the breaeh.^"'^ 98 Spear vs. Stacy, 26 Vt. 61. 09 Efoughto;!, va. Pattee, 58 N. H. 326 ; Monmouth Park Assn. vs. WW- lis Iron Works, 55 N. J. L. 132; 2i6 Atl. 140. lOoHosmer vs. True, 19 Barb. 106; March vs. Allabough, 103 Pa. 335; Hurd vs. Dunsmore, 63 N. H. 171; Bigony vs. Tyson, 75 Pa. 157 ; West- fall vs. Albert, 212 111. 68; 72 N". E. 4. loooWestfall vs. Albert, 212 111. 68; 72 N. E. 4. 101 Downey vs. O'Donnell, 86 111. 49; Louis vs. Brown, 7 Ore. 326; Louisville Water Oo. vs. Youngs- tovpn Bridge Co., 16 Ky. Lavr Eep. 350; Westerman vs. Means, 12 Pa. 97; Curtis vs. Brewer, 17 Pick. 513. In addition to the ground that the form of the bond, and the apparent intent of the parties is to treat the penalty as liquidated in this class of bonds, there is an additional reason for so eonstniing the contract, in that the actual damage resulting from delay in the performance of a contract, in many cases, cannot be ascertained, and in their nature su-s so uncertain as to raise an implica- tion of an intent to treat the dam- age as liquidated. Such has been the basis of many holdings. Collier vs. Betterton, 87 Tex. 440 ; 29 S. W. 467 ; Eeichenbach vs. Sage, 13 Wash. 364; 43 Pac. 354; Malone vs. Philadelphia, 147 Pa. 416; 23 Atl. 628; Wolf vs. Des Moines & rt. Dodge Ry. Co., 64 Iowa 380 ; 20 N. W. 481 ; Hennesey vs. Metzger, 152 111. 505; 38 N. E. 1058; Weiss vs. U. SI. F. & G. Co., 300 111. 11; 123 N. E. 749. Nilson vs. Jonesboro, 57 Ark. 168 ; 20 ;S. W. 1093. Where the sum named is greatly disproportionate to the probable loss from a. breach, it has been held that on this account, the penalty will not be considered as an agreement to pay liquidated damages. Clements vs. Schuylkill R. R. Co., 132 Pa. 445; 19 Atl. 276; Cochran vs. People's Ry. Co., 113 Mo. 359; 21 i9. W. 6; Colwell vs. Lawrence, 38 N. Y. 74. Miller, J.: "It is scarcely to be supposed, that the parties intended to fix an amount so extravagant, and which would be, if allowed as 220 THE LAW OF SUBETYBHIP. ' The penalty of a bond cannot be enlarged by a eontempora' neous agreement, and will be limited in any event, to the sum named in the instrument.^"^ §136. Same subject — Where the penalty or forfeiture is im- posed by statute. There is an important distinction between bonds intended as an indemnity between private persons, and those transac- tions in which a bond is given in pursuance of a Statute as in- demnity against a violation of a Statute or some policy of the law. In the first case, a breach of the bond involves; a violation of a private right, for which compensation in damages can be made ; but when the State is the beneficiary, and the condition of the bond is for a due compliance with the law of the State, dam- ages for the breach cannot be ascertained, and if there is to be any recovery, it must be upon the theory that the sum named in the bond is presumed to be liquidated damages. Where an individual or corporation is granted a franchise or privilege by the Government in pursuance of a Statute which requires the giving of a bond asr a condition of the grant, and to insure the performance of the terms of the grant in a certain way or within a certain time, the penalty of the bond must be considered as a forfeiture inflicted by the sovereign power for a breach of its laws, and the Government not required to prove damages as a basis '^f recovery. claimed, so grossly disproportionate of proof, and that it would be diffi- to the actual damages, as liquidated cult to show the nature of the in- damages for so trivial an omission jury caused, and the actual damages or delay, and I cannot discover any arising from the delay. such sufficient and satisfactory rea- Contra — Wileus vs. Kling, 87 111. son for any inference or conclusion. 107; Brennan vs. Clark, 29 Neb. Nor is any such intention to be pre- 385; 45 N. W. 472. sumed, upon the hypothesis that the ic^ Oregon Ey. & Nav. Co. vs. damages resulting from a breach of Swinburne, 22 Ore. 574; 30 Pac. this contract would be of such an 322. uncertain amount as to be incapable PEIVATB OBLIGATIONS. 221 Thus where the State of Ehode Island by Statute granted to a foreign Corporation the right to exercise the privileges and powers of a Common Carrier within the State, upon the condition that the Railroad would be completed within a cer- tain time, and required a bond to secure the performance of the condition. It was held that the penalty named in the bond was liquidated, and upon a breach, the whole axaount Would be forfeited to the State, without any proof of actual loss or damage to the State. The Court said : " We are satisfied that the ' proper solu- tion of the question now under examination is to be found in two principal considerations. The first of these is, that it was iiot intended by the parties, that the obligation given and ac- cepted shoiild be for an indemnity against any loss or damages expected to be suffered by the State, in the event that the railroad company should fail to build the railroad as required. It is found as a fact that no such loss or damage has in fact ensued. It is equally plain that none could possibly have arisen. . . . As to the State itself, the real party to the ar- rangement and contract, it could gain nothing in its political and sovereign character by the construction of the road, it could lose nothing by the default. If it could be supposed as possible that the State had in view the public interests of commerce and trade in the con- struction of the proposed railroad, and meant to provide for loss and damages to them by reason of its failure, the obvious answer is that no computation and assessment of actual dam- ages on that account would be practicable, leaving as an alter- native that the State, in fixing the penalty of the bond in the Statute, had established its own measure of the public loss. The question of damages and compensation was not, because it could not have been, in contemplation of the parties. The conclusion, in our opinion, can not be resisted that the intention of the parties in the transaction was that, if the railroad should not be built within the time limited, the Cor- poration should pay the State, absolutely and for its own use, the sum named in the bond."^'"' 103 Mr Justice Mat^iewa, in Clarlc ts. Barnard, lOS U. S. 436, 459; 2 S. Ct. 878. 222 THE LAW OP SURETYSHIP. §137. Interest as an element in the measure of damagfes. A surety upon a bond is liable for interest upon the dam- ages ascertained from the date of the demand. ^"^ If no de- mand is made, interest may be recovered from the date of serv- ice upon the surety in the action upon the bond.^"' Interest may be recovered as damages even though the in- terest raises the amount recovered beyond the sum named as penalty in the bond.^"" Where the condition of the bond is for the performance of an act and not the payment of money, the recovery thereon is limited to the amount of the penalty and interest thereon will run only from the date of entry of the judgment.^""" §138. Bonds to induce violation of law are void. Where the motive and purpose of the bond is to induce a violation of the law, the trajisaction is void. This result fol- lows, whether the bond is to secure the performance of a eon- )-"ee also Indianola vs. Gulf, W. T. & P. Ryi, 56 Tex. 594. Where a bond was executed to a city in the sum of $50,000, conditioned upon the construction of a railroad by a certain time, in consideration of a grant by the city of a right of way through its streets, it was held that recovery could be had of the entire amount of the bond as liquidated dannges. Since the city was not able to make proof of any actual damages, such construction must be given as will make the instrument operative. But see City of Aberdeen vs. Honey, 8 Wash. 251; 35 Pac. 1097. 104 Frink vs. Southern Express Co., 82 Ga. 33; 8 S. E. 862; United States vs. Poulson, 30 Fed. Rep. 231 • Brighton Bank vs. Smith, 94 Mass. 243; Brainard vs. Jones, 18 X. Y. 35; Ellyson vs. Lord, 124 Towa 125; 99 N. W. 582; Whereatt vs. Ellis, 103 Wis. 348; 79 N. W. 416; American Surety Co, vs. Pa- cific Surety Co., 81 Conn. 252; 70 Atl. 584. It has been held that wliere a sum is named in an agreement, as liqui- dated damages for the breach of the contract, that interest is not recov- erable. Hoagland vs. Segur, 38 N. .J. L. 230. See also United States vs. Broad- head, 127 U. S. 212; 8 S. Ct. 1191. 105 Curtis vs. United States, 100 IJ. S. 119; United States vs. Poul- son, 30 Fed. Rep. 231; Frink vs. Southei-n Express Co., 82 Ga. 33; 8 S. E. 862. 106 Beers vs. Shannon, 72 N. Y. 292; Burchfield vs. Haffev, 34 Kan. 42; 7 Pac. 548; Tyson vs. Sander- son, 45 Ala. 364; Carter vs. Thorn, 18 B. Mon. (Ky.) 613; Natchitoches vs. Redmond, 28 La. Ann. 274; Spo- kane & I. Lumber Co. vs. Loy, 21 Wash. 501; 58 Pac. 672; 60 Pac. 1119; Standard Oil Co. vs. Holmes. 82 111. App. 476. Affirmed, Holmes vs. Standard Oil Co., 183 111. 70: 55 N. E. 647; Pen- nell vs. Card, 96 Me. 392; 52 Atl. 801; Ellvson vs. Lord, 124 Iowa 125; 99 X. W. .'>82. Contra — ^Xew Home Sewing Ma- chine Co. vs. Seago, 128 N. C. 158; 38 S. E. 805 ; People's Savings Bank vs. Oampau, 124 Mich. 106; 82 N. W. 803 ; Board of Education vs. Na- tional Suretv Co., 183 Mo. 166; 82 S. W. 70. looo Sachs vs. American Surety Co., 72 App. Div. 60 (N. Y.). PEIVATB OBLIGATIONS. 223 tract which is prohibited by law, or a contract which is void by reason of an illegal or immoral consideration.^""' Thus a bond given to secure a sura agreed to be paid upon the consideration that the obligee would compound a felony, is void.^"' Also where the bond is given to secure purchases made for the use of a State in armed rebellion against the Government.^*' or for the purpose of rendering aid to the enemy in time of war in hiring soldiers to join the army of the enemy.^"* Bonds given to promote immoral acts^^" or fraudulent prac- tices"* or in restraint of marriage, "^ or in restraint of trade,*" are void. 1066 Estate of Eamsev vs. Whit- beck, 183 111. 550; 56 N. E. 322. 107 Cheltenham Eire Brick Co. vs. Cook, 44 Mo. 20; Vanover vs. Thompson, 40 N. C. 485; Buffalo Press Club vs. Greene, 86 Hun 20; 33 N. Y. S. 286. 108 Logan vs. Plummet, 70 N. C. 388. 109 Steele vs. Holt,, 75 N. C. 188. 110 Gray vs. Mathias, 5 Ves. Jr. 286; Walker vs. Gregory, 36 Ala. 180; Weinbrinner vs. Weisiber, 3 T. B. Mon. (Ky.) 3b. iiiTuxbury vs. Miller, 19 Johns. 311. Where the obligor agreed to pay a sum of money if the obligee would refrain from opposing the dis- charge of the former in bankruptcy, the obligee being a representative of creditors interested in opposing the charge. See also Goodwin vs. Blake, 3 T. B. Mon. (Ky.) 106. Eaton vs. Littlefield, 147 Mass. 122; 16 N. E. 771. In this case the obligee was a creditor of an insol- vent. The bond was conditioned to secure a, certain per cent, of the plaintiff's claim, in consideration that the plaintiff would vote for a certain person as assignee in insol- vency, held to be a fraud upon other creditors and to avoid the bond. 112 Woodhouse vs. Shepley, 2 Atk. 536. Lowe vs. Peers, 4 Bur. 2225. The covenant in this bond recites : " I do hereby promise Mrs. Catherine Lowe, that I will not marry with any person beside herself; if I do, I agree to pay to said Catherine Lowe £1,000 within three months next after I shall marry anybody else." Lord Mansfield : " This is only a restraint upon him against marry- ing any one else, besides the plain- tiff; not a reciprocal engagement ' to marry each other.' " As to illegality of contracts in re- straint of marriage see Chalfant vs. Payton, 91 Ind. 202. 113 Wiley vs. Baumgardner, 97 Ind. 66; Alger vs. Thacher, 19 Pick. 51. , Homer vs. Ashford, 3 Bing. 326, Ttest, J.: "The law will not per- mit any one to restrain a person from doing what the public welfare and his own interest requires that he should do. Any deed, therefore, by which a person binds himself not to employ his talents, his industry or his capital, in any useful undertak- ing in the kingdom, would be void.'' 224 THE LAW OF SUEETYSHIP. It is held that where a Corporation does business in a State contrary to the Statutes, all its acts are illegal, and that if officers and agents of such corporation execute bonds to secure the faithful performance of the business intrusted to them, the Sureties are not liable, inasmuch as the performance of the duties of their employment is illegal/^* In general all undertakings for indemnity against the conse- quence of doing an illegal act are void/^* 11* Bank of Newberry vs. Stegall, 41 Miss. 142; Daniels vs. Barney, 22 Jnd. 207. Thorne vs. Travellers' Ins. Co., 80 Pa. 15. " There can be no doubt of the constitutional pcwer of the legislature to prescribe the conditions under which a foreign corporation shall trans- act business in this state, and the manner in which its agents shall be qualified, before entering upon their duties. It has often been held that an action founded on a transaction prohibited by statute cannot be maintained, although a penalty be imposed for vi.olating the law, and it be not expressly declared that the contract be void. Mitchell vs. Smith, 1 Binn. 118; Seidenben- der et al. vs. Charles' Adm., 4 S. & R. 151; Holt vs. Green, 23 P. F. Smith 198. In this last case it was said, the objection may often sound very ill in the mouth of a defendant, but it is not for his sake the objection is allowed, it is founded on general principles of policy which he shall have the advantage of, contrary to the real justice between the parties. That -principle of public policy is that no court will lend its aid to a party who grounds his action upon an immoral or upon an illegal act. It is claimed, however, that conceding the rule that an illegal contract will not be enforced by a court, yet when it has been executed by the parties themselves, and the illegal object of it has been accomplished, the money or the thing which was the price of it may be a legal consideration be- tween the parties for a promise ex- press or implied; and the court will not unravel the transaction to dis- cover its origin. We may concede this view of the law to be correct, as an abstract proposition ; yet it by no means controls this case. This is not an action against Thorne alone, for money had and received. It is against him and his sureties jointly on their bond, for his alleged breach of duty as a duly appointed agent of the corporation." 116 James vs. Hendree, 34 Ala. 488. Lea vs. Collins, 36 Tenn. 393. In this case the obligor promised in- demnity against the publication of a, libel. But see Jewett Pub. Co. vs. But- ler, 159 Mass. 517; 34 X. E. 1087. A bond of indemnity to induce a breach of trust is void. Moss vs. Cohen, 36 N. Y. iS. 265. A recovery on the bond of an employee, the fruits of ' which em- ployment involve a violatiom of law, will not be allowed. Boylston Bottling Co. vs. O'Neill, 231 Mass. 498; 121 N. E. 411; 2 A. L, E. 902, note. PRIVATE OBLIGATIONS. 225 §139. Bonds to prevent perfonnance of public duty or to induce acts in violation of public duty are void. A bond given to induce a public officer to refrain from doing that which the law requires him to do, or to induce him to act in violation of his duty, is void, as against public policy. Thus where a Sheriff having received, by virtue of his office, a writ of restitution, is induced by another, and in considera- tion of a bond of indemnity, to refuse to execute the process. The sureties upon the bond of indemnity are not liable to the Sheriff for loss sustained by him in consequence of his act.^^° A bond to protect an officer from the consequences of dis- obeying the process of the Court, cannot be upheld upon the theory that the officer declines to act in good faith, or because of some uncertainty as to his rights. If an officer holding a writ of restitution is uncertain wheth- er the person in possession is the one . named in the writ, or having a writ of execution or attachment is uncertain whether the property pointed out belongs to the debtor, he may usually, without peril, withhold service upon the process until indemni- fied by the party in interest. But a bond of indemnity to an officer as an inducement to refrain from action, presupposes that the officer would otherwise have obeyed the writ, and that he was not uncertain as to his duty. A bond to a Public Officer as an inducement to perform an act within the scope of his authority, is valid, providing the question whether the act is lawful or unlawful depends upon facts which he has no means of ascertaining, and where he acts in good faith. If an officer holds a writ of execution or attachment, his duty requires him to levy upon the property of the debtor, and it is unlawful for him to levy upon the property of a third 118 Harrington's Admihistrator ex rel. vs. Harrington, 41 Mo. App. vs. Crawford, 61 Mo. App. 221. 439 ; Hardesty vs. Price, 3 Col. 556 See also Blackett vs. Crissop, 1 Buffendeau vs. Brooks, 28 Cal. 641 Lord Raym. 278; Cass Co. vs. Beck, Griffin vs. Hasty, 94 N. C. 438 76 Iowa 487; 41 N. W. 200; Carroll Morgan vs. Hale,- 12 W. Va. 713. vs. Partridge, 12 Mo. App. 583; State 226 THE LAW OF SURETYSHIP. person. Yet the officer cannot be placed in such a position as to require him to determine in advance, and without proof, the conflicting claims of ownership in the property. If when placed in such situation, he accepts a bond of in- demnity in good faith, the bond will be held. It is not against public policy to submit in this way a controverted question to judicial determination.^^^ But if he executes the Avrit with knowledge that he is committing a tr&pass, the bond is void.^^' If a trespass or other, unlawful act of the officer is a past transaction, the bond of inderhnity against the consequence of such act will be valid, as in such a ease the bond is not the inducement to the trespass. Thus a Sheriff levied upon and sold merchandise claimed by a third party, and subsequently refused to pay over the pro- ceeds to the execution creditor unless indemnified, the bond was held to be valid."" §140. Discharge of surety upon a bond by payment or acts equivalent to payment. A surety upon a bond is exonerated by any act or agreement between the principal and obligee which operates as payment of the penalty described in the undertaking, and the debt being once satisfied can not be -revived against the surety, except in those transactions heretofore considered in which the medium of payment, or the security substituted is void.^^" It is held that where a principal borrows money with which to pay a judgment creditor, and the latter on receipt of the money, at the request of the debtor, transfers the judgment to the person from whom the principal borrows, that the sure- ties upon the supersedeas bond are discharged. The judgment 117 Wolfe vs. McClure, 79 111. 713; Collier vs. Windham, 27 Ala. 564; Miller- vs. Rhoades, 20 0. S. 291. 494 ; Mays vs. Joseph, 34 O. S. 22 ; ii9 WeStervelt vs. Frost, 1 Abb. Stark vs. Raney, 18 Cal. 622; Forni- Pr. (N. Y.) 74. quet vs. Tegarden, 24 Miss. 96 ; Mc- See also GriflStha vs. Hardenbergh, Cartney vs. Shepard, 21 Mo. 573; 41 N. Y. 464. Foster vs. Clark, 19 Pick. 329. 120 Ante Sec. 97. lis Morgan vs. Hale, 12 W. Va. PEIVATE OBLIGATIONS. 227 creditor by dealing direct with the third party, might confer upon him, by assignment, title to the security; but payment being made by the hand of the debtor, is a technical satisfaction of the judgment.^^^ Where a debt secured by bond has been paid by an applica- tion of funds in the bands of the obligee, the parties can not thereafter by agreement apply the payment to some other debt, and revive the obligation under the bond.^"^ Where the principal at the maturity of the debt executes his note to the obligee, it will not release the bond, unless accepted as payment/''' Where it is shown that the obligee agreed to accept the notes of the principal in payment, the surety will be released whether the notes are paid or not.^^* A bond given to secure a note held by a creditor, will be valid as security for a renewal of the note. In such case the bond secures the debt, and the satisfaction of the note by renewal is not deemed a payment.^^^ The possession of a bond by a surety raises a presumption of payment.*^' .§141. Statutes of limitations as a defense to sureties upon a bond. The Statutes of various States provide for a period of limi- tation upon the right to bring an action upon a bond. The usual form of the Statute is that the action must be brought within the limitation after the " cause of action ao- 121 Burnet vs. Courts, 5 Har. &, 125 Shrewsbury Savings Institu- John. (Md.) 78. tion's Appeal, 94 Pa. 309. 122 Gibson vs. Rix, 32 Vt. 824; 126 Carroll vs. Bowie, 7 Gill Woodman vs. Mooring, 3 Dev. Law (Md.) 34. (N. C.) 237. 127 The Statute in New Jersey 123 Shumway vs. Reed, 34 Me. reads : " No action shall be brought 560; Price vs. Barnes, 7 Ind. App. 1. upon any bond given to the Pres- 121 Smith vs. Jackson, 97 Iowa ident. Directors and company of any 112; 66 N. W. 80; Morris Canal & Bank, or to any Corporation, by any Banking Co. vs. Van Vorst, 21 N. officer of such bank or corporation, J. L. 100. with conditions for his good behavior, 228 THE LAW OF STJKETTSHIP, The Statutes do not undertake to define when the cause of action accrues, and judicial construction of this important ele- ment of the right to invoke the Statute, has not heen uniform in this country. For the most part it is assumed that the limitation com- mences to run from the date the obligor is liable to a suit, but subject to the modification that the law will not permit the Statute to be used to protect fraud. Where the principal violates his trust by defalcations, he and his surety are liable to an action from and after the date of the defalcation, and within the meaning of the Statute, the cause of action then " accrues." It, however, often occurs that the obligee has no knowledge of the default at the time it oc- curs, and in those cases where the principal fraudulently con- ceals the cause of action for a period beyond the limitation of the Statute, three questions have arisen, relating to the defense, which the Statute affords. (a) Will the fraudulent concealment of the default by the principal, prevent the operation of the Statute as against the principal himself ? (b) Will the surety who has been guilty of fraudulent con- cealment be discharged by the Statute, even though the princi- pal is held ? (c) To what extent is diligence required of the obligee in discovering default? It has been urged that since the Statute in plain terms fixes the time within which action shall be brought, and without qual- ification dates the limitation from the time the cause of action accrues, that it is not vsdthin the province of the Courts to repeal the Statute by an equitable construction in those cases where the diligence in concealing fraud, is greater than the diligence of those interested in its discovery.^^* or for the faithful discharge of the In Ohio within fifteen years "after duties of his station, or touching the cause of action accrues." the execution of his office, against 128 Troup vs. Smith's Executors, either principal or sureties, after 20 Johns. 33, Spencer, G. J. : " The the expiration of two years from the inquiry is, when did the plaintiff's accruing of the cause of action." cause of action accrue? Most cer- PEIVATE OBLIGATIONS. 229 The contrary view, and the one which receives the support of the weight of authority, is that the Statutes of Limitation must be expounded reasonably, so as to suppress and not aug- ment the evils they are intended to cure. That the purpose of Statutes of Limitation is to suppress fraud by preventing the assertion of claims after such lapse of time that the truth can not he well ascertained; that the Statute should not be so construed as to encourage fraud and deceit, so that under the plea of the Statute, the party can take advantage of his own wrong doing.^^' The further question arises whether the surety will be de- prived of the literal- application of the Statutes in his behalf on account of the fraudulent concealment of the principal, to which he was not a. party. tainly when the fraud was consum- mated The fact that the plaintiff did not 'discover the imposition practised upon him, is entirely distinct from the existence of such fraud and imposition. If, then, the plaintiff's cause of action accrued upon the consummation of the fraud by the testator, and not at the time plaintiff discovered it, the Statute interposes as a protec- tion, unless the action has been com- menced and sued within six years next after the cause of action ac- crued. " But it is asserted, that fraud com- mitted under such circumstances as to conceal the knowledge of a fact, and thus preventing a plaintiff from asserting his rights within the lim- ited period, may be replied, and is an answer to the plea of the Statute of Limitations, if the action or suit be brought within six years after the discovery of the fraud But Courts of Law are expressly bound by the Statute; it relates to specified actions; and it declares that such actions shall be com- menced and sued within six years next after the cause of such action accrued, and not after; thus, not only affirmatively declaring within what time these actions are to be brought, but inhibiting their being brought after that period. I know of no dispensing power which courts of law possess, arising from any cause whatever." 129 Bree vs. Holbech, 2 Doug. 655 ; Reynolds vs. Hennessy, 17 E. I. 169; 20 Atl. 307; 23 Atl. 639. First Mass. Turnpike Co. vs. Field, 3 Mass. 201, Parsons, G. J.: " The delay of bringing the suit is owing to the fraud of the defendant, and the cause of action against him ought not to be considered as having accrued, until the plaintiff could ob- tain the knowledge that he had a cause of action. If this knowledge is fraudulently concealed from him by the defendant, we should violate a sound rule of law, if we permitted the defendant to avail himself of his own fraud." Bradford vs. McCor- mick, 71 Iowa 129; 32 N. W. 93. 230 THE LAW OP SUEETTSHIP. While the principal who is seeking to use the Statutes to cover a fraudulent act may properly be denied the protection of the Statutes, the surety who is innocent of fraud must be held, if at all, upon the theory that the contract of suretyship makes his liability co-extensive with the principal, without regard to the particular reasons whereby the liabilily of the principal is established. A surety is bound by the fraudulent conduct of his principal, and although without fraud on his own part, he must answer under his contract for such default of his principal, which is not barred by the Statute."" The obligee in the bond does not owe a duty to the surety of watching the affairs of the principal for the purpose of setting in operation the Statute of Limitations against himself. The obligee owes a duty of good faith; he cannot conceal that which he knows from the surety, nor be blind to facts which from his position he is bound to know, but he is not chargeable with negligence in failing to make^ investigations, the result of which would be material for the surety to know.^'^ The cause of action upon a bond of indemnity to " save harmless from damages " does not arise until the obligee has suffered some damages. The undertaking is not to acquit the obligee from all liability for damages, but is intended to mere- ly indemnify against actual damages, and the Statute of Limi- tations will begin to run only when the obligee has paid the damages.^'^ 130 Sparks vs. Farmers' Bank, 3 the sureties who covenanted that Del. Ch. 275. their principal should ' ■well and 131 Graves vs. Lebanon National truly perform the duties ' of his Bank, 10 Bush (Ky.) 28. " The di- position Their covenant is rectors may have been negligent in unconditional, and no failure of the discharge of their duties, and duty upon the part of the directors this negligence may have enabled of the association, short of actual M. for the time to misappropriate fraud or bad faith, can be deemed the funds of the bank, and to con- sufficient to exonerate them from ceal its true condition by false re- its performance." Wayne vs. Com- ports made to the comptroller of mercial Nat. Bank, 52 Pa. 343. the currency and by false entries is^ Campbell vs. Rotering, 42 upon the books of the association. Minn. 115; 43 N. W. 795. But this negligence cannot avail PRIVATE OBLIGATIONS. 231 §142. As to who are proper parties in an action upon a bond. Where an instruinent is under seal no person can sue or be sued upon its covenants except those who are named as parties therein.^^'' And so a bond under seal, in which the obligees are de- scribed as " agents," without disclosing for whom the parties are so acting, cannot be enforced by the principal.^^* If the bond is not under seal, such as those instruments originating in States where private seals have been abolished, or where the distinction between sealed and unsealed instru- ments has been removed by Statute, the person having a beneficial interest in the bond, may maintain an action upon it, although not a party to the instrument. 133 Beckham vs. Drake, 9 M. & W. 79; Townsend vs. Hubbard, 4 Hill (N. Y.) 351; Briggs vs. Partridge, 64 N. Y. 357. Even though the instrument on its face reads that the party signing and sealing is an agent, it cannot be enforced by the principal. Kier- sted vs. Orange & Alexandria K. R. Co., 69 N. Y. 343 ; Schaefer vs. Hen- kel, 75 N. Y. 378; Huntington vs. Knox, 7 Cush. 374; Andrews vs. Estes, 11 Me. 267. Follansbee vs. Johnson, 28 Minn. 311; 9 N". W. 882. The distinction in this respect, between contracts under seal and simple contracts, has since been abandoned by the Minne- sota Court as being merely technical and without merit. Jefferson vs. Aseh, 53 Minn. 446; 55 N. W. 604. Miller vs. Kingsbury, 28 111. App. 532; Moore vs. House, 64 111. 162. A Statute in Illinois now de- clares that contracts under seal may |3e sued upon as if unsealed. Harms vs. McCormick, 30 111. App. 125; Dean vs. Walker, 107 111. 540. See also McDowell vs. Laev, 35 Wis. 171; Houghton vs. Milburn, 54 Wis. 554 ; 12 N. W. 23. Wherein no distinction is made between seal- ed and unsealed instruments in re- spect to the enforcement for the benefit of third parties. The pre- ponderance of authority, however, maintains the view stated in the text. Willard vs. Wood, 135 U. S. 309; 10 S. Ct. 831; Pettee vs. Peppard, 120 Mass. 522; Bobbins vs. Ayres, 10 Mo. 539; Crowell vs. Hospital of St. Barnabas, 27 N. J. Eq. 650; Fairchild vs. North Eastern Mut. Life Assn., 51 Vt. 613. i3*Henricus vs. Englert, 137 N. Y. 488; 33 N. E. 550. See also Packard vs. Brewster, 59 Me. 405; Parmington vs. Hobart, 74 Me. 416. But see Emmitt vs. Brophy, 42 O. S. 82. Where it was considered immaterial whether the bond was under seal or not, and that in either event a third person, though not named in the instrument, might maintain the action in his own name. 232 THE LAW OF SURETYSHIP. The rule is, however, subject to the qualification that there must be an intention of benefiting the third party, to whom the promisee is under a legal obligation to do that which is called for in the bond. "° A number of the States have code provisions, enabling the real party in interest to maintain an action upon the bond in his own name, although not named as a party in the instru- ment."" In England, the doctrine that a party for whose benefit a contract is made may enforce it in his own name, does not pre- vail,^^' except where the obligor is shown to have received money for the use of the third party, in which case, the latter may sue for it.^''' If a bond runs to one in a representative capacity, such as Administrator or Guardian, it is held that the obligee may bring the action in his individual capacity.^'* Or an action may be brought by an officer in his official capacity.^*" If the obligee is deceased, his administrator may sue on the bond.^*^ 135 Jefferson vs. Asch, 53 Minn. 446; 55 N. W. 604; Carnahan vs. Tousey, 93 Ind. 561; Leake vs. Ball, 116 Ind. 214; 17 N. E. 918; Piano Mfg. C9. vs. Burrows, 40 Kan. 361; 19 Pae. 809 ; Mumper vs. Kelley, 43 Kan. 256; 23 Pac. 558; N. Y. Life Ina. Co. vs. Hamlin, 100 Wis. 17; 75 N. W. 421. As to bonds given to secure build- ing contracts, with covenants to pay labor and material claims, see Ante See. 131. 136 Alabama Civil Code, See. 28: " Actions on promissory notes, bonds, or other contracts, express or implied, for the payment of money, must be prosecuted in the name of the party really interested, whether he has the legal title or not." In California, the Civil Code provides ( Sec. 1559 ) , that " a con- tract, made expressly for the bene- fit of a third person, may be en- forced by him at any time before the parties thereto rescind it." isTTweddle vs. Atkinson, 1 Best. & Sm. 393; Price vs. Easton, 4 Barn. & Ad. 433 ; Gandy vs. Gandy, L. R., 30 Ch. Div. 57 ; In re Eother- ham Alum & Chem. Co., L. R., 25 Ch. Div. 103. 138 Lilly vs. Hays, 6 Ad. & Ell. 548. i39Waddell vs. Moore, 24 N. C. 261; Ayres vs. Toland, 7 Har. & John. (Md.) 3. 1*0 Chancellor vs. Hoxsey, 41 N. J. L. 217. 1*1 Young, Admr., vs. Patterson, 165 Pa. 423; 30 Atl. 1011. PRIVATE OBLIGATIONS. 233 §143. Joinder of parties plaintiff. All persons for whose benefit a contract is made must join in an action for the breach of it. A bond running to two or more obligees, does not constitute a contract with one of them separately, and except when one or more of the obligees refuses to join in the action, or for other good reason, such as in some jurisdictions, the death of one joint obligee, no action can be maintained unless all are made plaintiffs."' But where a bond is made payable to a principal or a designated agent, either may bring suit upon it.^*'" Where several obligees are joined in one bond, but to secure distinct and separate rights, their remedy is by separate action. Thus a principal, representing four Insurance Companies, executed a bond in which they were all named as obligees, conditioned that the principal would faithfully perform his duties as agent toward each Company respectively. It was considered that the general covenant was made with each Com- pany separately, and that a joint action could not be main- tained."^ Also where distinct obligations are assumed toward one joint obligee which did not run to the other, each obligee can have a separate action for the breach which affects his especial right.^** Even though the conditions of the bond may require a differ- ent relief on the part of the several obligees, the transaction may nevertheless be joint.^*^ 142 Bradburne vs. Botfield, 14 M. In Massachusetts, where one of 6 W. 559; Phillips vs. Poole, 96 Ga. several joint obligees is deceased, 515; 23 iS. E. 504; Burns vs. Fol- the survivor may maintain a sepa- lansbee, 20 111. App. 41; Sims vs. rate action on the bond. Donnell vs. Harris, 47 Ky. 55; Wallis vs. Dilly, Manson, 108 Mass. 576. 7 Md. 237; Dana Executor vs. 1420 Files vs. Reynolds, 66 Ark. Parker, 27 Fed. Eep. 263; Phillips 314; 50 S. W. 509. vs. Singer Mfg. Co., 88 111. 305; i-is Germania Fire Ins. Co. vs. Norma vs. Conlan, 68 N. J. L. 88; Hawks, 55 Ga. 674. 52 Atl. 210; International Hotel Co. Stee also Hees vs. Nellis, 65 Barb. vs. Flynn, 238 111. 637; 87 N. E. 440. 855; 15 Ann. Cas. 1062; Baker vs. l"* Sprague vs. Wells, 47 Minn. Peterson, 300 111. 526; 133 N. E. 504; 50 N. W. 535; White vs. Bow- 214. man, 78 Tenn. 55; Eenkert vs. Bl- In an action of debt on an execu- liott, 79 Tenn. 235. tor's bond, a person who is a party But see McMahon vs. Webb, 52 to the bond is a necessary party Miss. 424. plaintiff, although he has no inter- 145 Lillard vs. Lillard, 44 Ky. 340; eat in the property. Stevens vs. Haughton vs. Bayley, 31 N. C. 337. Partridge, 88 111. App. 665. 234 THE LAW OF SURETYSHIP. §144. Joinder of parties defendant. If a bond is joint or several, any one or more of the obligors may be joined as defendants in the same action.^*" In Massachusetts and Illinois it is held that the plaintiff may bring his action against one or all of the obligors jointly and severally liable but not against an intermediate number.'*^ Where the obligors are severally liable they cannot be joined in one action,^** except where the code, so provides."" For the most part the codes of the States authorize such joinder of parties as will give effectual relief without requiring a multi- plicity of actions, as where one of two joint obligors is deceased, the survivor may generlally be sued jointly with the Adminis- trator of the deceased obligor, although one is charged de bonis propriis and the other de bonis testatoris}'^" Where successive bonds are given to secure the same liability, all the sureties . upon the several bonds may be joined in one action, if there is a common liability.^"' Where the bond of an employee recites that the surety will reimburse the obligee for loss sustained by the defalcation of 1*6 state vs. Bennett, 24 Ind. 383; 82 Tex. 653; 18 S. W. 152, Hobby, McKeevs. Griffin, 60 Ala. 427; Poul- J.: "Ag- the record stands, the sure- lain vs. Brown, 80 Ga. 27; 6 S. E. ties on the bond executed in Sep- 107; Fidelity & Deposit Co. vs. tember, 1884, are liable, unless the Aultman, 58 Fla. 228; 50 So. 991. second bond was executed as a sub- 1*' Leonard vs. Speidel, 104 Mass. stitute for and in lieu of the first 359; Gottfried Brewing Co. vs. Mc- bond; and the sureties on' the bond Donald, 146 111. App. 601. But upon executed in November, 1886, are official bonds, Ch. 103, iSec. 13, lUi- also liable, unless the defalcation or nois Statutes, authorizes suits shortage of Ponder occurred prior to against any one or all of the ., ° , ., . , , -kt .,, obligors. ^^ "'^^ "' their bond. Neither of 148 ISitate vs. Powers, 52 Miss. 198. these facts appear. But on the con- 149 Tlie Ohio Code provides : "One trary, it is distinctly stated thaA or more of the persons severally the second bond was executed as liable on an instrument may be in- , jj... , ., , ■, -x * j eluded in the same action thereon." additional seyurity,' and it does Sec. 5009. appear that the shortage or defalca- 150 Lawrence vs. Doolan, 68 Cal. tion transpired subsequent to the 309; 5 Pac. 484; 9 Pac. 159; Green execution of the second bond. These vs. Conrad, 114 Mo. 651; 21 S. W. ,... . , (j„Q ' ' . conditions present a case of a oom- Contra^-Metz vs. The People, 6 ™0" liability on the part of all of Col. App. 57; 40 Pac. 51; iState vs. the sureties relating to the same sub- Banks, 48 Md. 513. jeet matter, and where the right of 161 Singer Mfg. Co. vs. Ponder, PRIVATE OBUQAXiON*. 235 the employee, also that the employee will indemnify the surety, against loss on the bond, such instrument is not the joint obli- gation of the principal and surety, and the obligee can main- tain an action only against the surety.^^^ In a state where principal and surety are in law joint and several contractors and obligors, the surety's obligation is not that of an indemnitor, or of a collateral guarantor, against whom no action can be brought without demand or notice, or until after failure to collect from the principal. The obligation is an absolute and unconditional one, binding both principal and surety for the full performance of each and every term, condition, and requirement of the contract. A joint or a separate action might at common law and under the statute be brought thereon.^^'* Sometimes it happens in the case of a jdint and several bond executed by two or more sureties, the principal's obligation is for the full penalty and the sureties' obligations are limited to separate parts thereof. It is settled law that a single action against the principal and all the sureties may be maintained on such an obligation, and that separate judgments may be rendered against the several defendants properly limited to the amount for which each surety may have separately bound himself.^^* recovery existed as against all of 1^2 American Bonding & Truat Co. them, because the contract entered vs. Milwaukee Harvester Co., 91 into by all of the sureties was for Md. 733; 48 Atl. 72. the same purpose, and had reference 153 Neil vs. Board of Trustees, 31 to the same matter, but was merely 0. IS. 15; Saint vs. Wheeler & Wil- entered into at different times. son Mfg. Co., 95 Ala. 362 ; 10 So. "Under the averments of the peti- 539 ; 36 Am. iSt. Rep. 210 ; Walsh tion the guit could have been main- Const. Co. va. City of Cleveland, 250 tained separately agaitlSt the sure- Fed. 137. ties on these bonds for the same de- 15* Heppe vs. Johnson, 73 Cal. falcation, and if so, no reason is 265; 14 Pao. 833; Brigga vs. Mo- perceived why, upon the principle of Donald, 166 Mass. 37 ; 43 N. E. avoiding many suits, this could not 1003; Walsh Const. Co. vs. City be maintained." of Cleveland, 250 Fed. 137. Powell vs. Powell, 48 Cal. 235. See. 145. Sec. 146. Sec. 147. Sec. 148. Sec. 149. Sec. 1.50. CHAPTER VI. OFFICIAL BONDS Who are Public Officers. The Duty of a Public Officer to Give a Bond Arises from Statute. Bonds of Deputies. Qualification and. Approval of Sureties. The Signing of the Bond by the Principal. Liability of Sureties as Affected by Failure to Deliver or Fur- nish the Bond Within the Time Required by Law. Stec. 151. Sureties Upon Official Bonds Discharged by Alterations to Which They Do Not Consent. Sec. 162. Alteration in the Duties of the Principal by Amendment to the Law. 6ec. 153. Extension of Tenure of Office by Legislative Act. Sec. 154. Special Bonds Given by Officers Who Have also Given General Bonds. Sec. 155. Concealment of Matters Material to the Risk. Sec. 156. Bonds of Public Officers not Retroactive and Cover only the Period Named in the Bond. Sec. 157. Same Subject — ^Where the Wrongful Act was Partly in One and Partly in Another Term. Sec. 158. Second Bond Given in the Same Term Cumulative. Sec. 159. Liability of Surety for the Negligence or Error in Judgment of a Public Officer. Sec. 160. Liability of 6lureties for Failure of Public Officer to Account for the Use of Public Funds. Sec. 161. Sureties not Liable for Defaults of Principal in not Perform- ing His Contracts with Persons Dealing with Him in His Official Capacity. Sec. 162. Sureties Upon Official Bonds are mot Released by the Negligeince or Misconduct of Other Officials. Sec. 163. Sureties not Liable for Failure to Account for Money Received by the Principal Outside the Scope of His Office. S'ec. 164. Liability Upon Bond of Sheriff or Constable for Trespass and Other Wrongs Committed Colore Officii. Sec. 166. View that Sureties are not Liable for Wrongs of Sheriff or Constable Committed Colore Officii. Sec. 166. Liability for Loss of Public Money by Failure of the Bank Used as Public Depositary. Liability for Loss of Public Money by Theft or Robbery. Liability Against Judicial Officers Acting Without Jurisdiction. Liability of Judicial Officers for Ministerial Acta. Sec. tm. Sec. 168. Sec. 160. : 236 OFFICIAL BONDS. 237 Sec. 170. Liability of Principal for Acts of his Deputy. Sec. 171. Liability on Bond of a Notary Public. Sec. 172. Defenses in, Actions Upon Bonds of Public Officers. Sec. 173. Presumption that Official Duty has been Performed. Sec. 174. Evidence Against Sureties on Official Bonds. Sec. 175. Same Subject — Judgment Against Principal as Evidence Against the Surety. See. 176. Same Subject — View that Judgment Against the Principal is Prima Facie Evidence Against the Surety. Sec. 177. Same Subject — View that Judgment Against the Principal is Conclusive Against the Surety. Sec. 178. Limitations Upon Actions Against Sureties on Official Bonds. §145. Who are public officers. A public office is a franchise conferred by the Government of the State or Municipality, either by election or appointment, carrying with it the right and duty of exercising a public func- tion. It differs from employment or agency in that the latter arises out of contract, in which the rights of the parties are definite and specific, and the duty and tenure of the employment are fixed. Whereas the terms of the franchise of a public office are imposed by law, sometimes by the general Statute creating the office, and sometimes by the will of other public officers to whom the law has delegated the power." There are no contracting parties to an office. A person ac- cepts a public office without any covenants express or implied between himself and the State as to the character of his duties, and without any binding stipulations as to whether the duties thus conferred by law upon his office, shall be continued as the duties of his position during the tenure of the office. The dom- inant features of an office are not found in contract relations.'^ o For a distinction between a pub- boken, 82 A. 528 ; 82 N. J. L. 200. lie office and public employment, i Nichols vs. MacLean, 101 N. Y. see Brown vs. Russell, 166 Mass. 528; 5 N. E. 347, Andrews, J.: 14; 43 N. E. 1005; Throop vs. hwng- "The right to. hold an office and to don, 40 Mich. 673 ; State vs. receive the emoluments belonging to Broome, 61 N. J. L. IIS; 38 Atl. it does not grow out of any con- 841 ; U. S. vs. Maurice, 2 BrOck. tract with the State, nor is an office (U. S.) 96; Lucas vs. Futrall, 84 property in the same sense that cat- Ark. .540; 106 S. W. 667; Hart vs. tie or land are the property of the Mayor of Newark, 77 A. 1086; 80 owner. It is, therefore, 'the set- N. J. L. 600; Wells vs. State, 94 tied doctrine that an officer acquires N. E. 321; 175 Ind. 380; Preder- no vested right to have atn office icks vs. Boaird of Health of Ho- continued during the time for which 238 THE LAW OF SUEETYSHIP. The Dartmoutli College case ^ points out the vital distino- tion between an office and a contract, in holding that all persons having contractual relations with the Government are protected until by their own consent or by their own breach the contract is abrogated. But a person in an official relation is subject to the will of the sovereign, both as to the duties required of him, and the tenure of the office. It does not necessarily follow that all public service ren- dered according to the requirements of law, to which a person is appointed under the provisions of a public Statute, constitutes such person a public officer. His relations to the State may be contractual, notwithstanding he is in public service and per- forming duties defined by law. Thus wheore the Legislature authorized a Geological and Agricultural survey, and by the act provided for the appoint- ment of three Commissioners, whose duties were specifically defined in the Statute, and the Governor of the State was re- he was elected or appointed, nor to have the compensation remain un- changed. The legislature may abol- ish an office during the term of an incumbent, or diminish the salary or change the mode of compensa- tion, subject only to constitutional restrictions." See also Beebe vs. Robinson, 52 Ala. 66; In re Bulger, 45 Cal. 553; State vs. Bell, 116 Ind. 1 ; 18 N. E. 263; Crook vs. People, 106 111. 237; Augusta vs. Sweeney,- 44 Ga. 463; Bryan vs. Cattell, 15 la. 538 ; Evans vs. Populus, 22 La. Ann. 121; Prince vs. Skillin, 71 Me. 361; Hyde vs. The State, 52 Miss. 665; Love vs. Jersey City, 40 N. J. L. 456; Bunting vs. Gales, 77 N. C. 283; Kilgore vs. Magee, 85 Pa. 401; State of Iowa vs. Spaulding, 72 N. W. 288 ; 102 Iowa 639 ; State vs. Smith, 145 N. C. 476; 59 S. E. 649; State vs. Mackie, 82 Conn. 3i)8; 74 AtL 759; Richie vs. Philadelphia, 225 Pa. oil; 74 Atl. 430. That the franchise of a publio office is not contractual is further shown by the fact that the officer may at any time put an end to the relation by resignation, and with- out the consent of the sovereign. Hoboken vs. Gear, 27 N. J. L. 265; United States vs. Edwards, 1 Mc- Lean 467. But see Eegina vs. Lane, 2 Md. Raym. 1304; Edwards va. United States, 103 U. Si 471. In some IStates the constitution prohibits change of salaiy during term. Foreman vs. People, 209 111. 567; 71 N. E. 35. 2 Trustees of Dartmouth College vs. Woodward, 4 Wheat. 518, 694, Htory, J.: "It is admitted, that the State legislatures have power to enlarge, repeal and limit the au- thorities of public officers, in their official capacity, in all cases, where the constitutions of the States re- spectively do not prohibit them; and this, among others, for the very reason, that there is no express or implied contract, that they shall always, during their continuance in office, exercise such authorities; they are to exercise them only dur- ing the good pleasure of the legis- laturp." OFFICIAL BONDS. 239 quired to enter into a contract with the Commissioners for six years, for the compensation named in the Statute, the relations of the Commissioners to the State were deemed contractual and not official, and a subsequent repeal of the Statute providing for the appointment was held not to affect the tenure of their employment.* These essential distinctions between contractual and official 3 Hall vs. Wisconsin, 103 U. S. 5, Bwayne, J. : " In a sound view of the subject it seems to us that the legal position of the plaintiff in error was not materially diiferent from that of parties who, pursuant to law, enter into stipulations limit- ed in point of time, with a State, for the erection, alteration, or re- pair, of public buildings, or to sup- ply the officer or employees who oc- cupy them with fuel, light, station- ery, and other things necessary for the public service. The same rea- soning is applicable to the countless employees in the same way, under the national government. It would be a novel and startling doctrine to all these classes of persons that the government might discard them at pleasure, because their respect- ive employments were public offices, and hence without protection of contract rights." See United States vs. Hartwell, 6 Wall. 385. Where the questions in- volved a clerk in the office of the Assistant Treasurer of the United States, whose position as such clerk was provided for by Statute and the salary fixed by Congress. The ma- jority of the Court considered that he was an officer. Swayne, J. : " He was a public officer. The General Appropriation Act of July 23d, 1866, authorized the assistant treasurer to appoint a specified nuipber of clerks, who were to receive, respectively, the salaries thereby prescribed. The in- dictment avers the appointment of the defendant in the manner pro- vided in the act. " An office is a public station, or employment, conferred by the ap- pointment of government. The term embraces the ideas of tenure, dura- tion, emolument, and duties. " The employment of the defend- ant was in the public service of the United States. He was appointed pursuant to law, and his compensa- tion was fixed by law. Vacating the office of his superior would notiave aflfected the tenure of Jiis place. His duties were continuing and perma- nent, not occasional or temporary. They were to be such as his superior in office should prescribe. "A government office is different from a government contract. The latter from its nature is necessarily limited in its duration and specific in its objects. The terms agreed upon define the rights and obliga- tions of both parties, and neither may depart from them without the assent of the other." Shelby vs. Al- corn, 36 Miss. 289. " And we apprehend that it may be stated as universally true, that where an employment or duty is a continuing one, which is defined by rules prescribed by law and not by contract, such charge' or employment is an office." 240 THE iAW OF SURETYSHIP. relations furriish the basis of important differences between the contract rights of those who undertake to answer for the de- faults of private and public obligations. Sureties upon the bonds of public officers must be held to contract with reference to the special control which the sover- eign reserves in granting such office. Defenses based upon the alteration of the contract between, principal and obligee, and other defenses grovring out of defects in a contract relation to which the suretyship is collateral, can- not generally be interposed where the relation of the principal to the obligee is official. An official oath is the medium by which the officer is bound to his employment, and is a distinguishing characteristic of aii office.* * Trainor vs. Board of Auditors, 80 Mich. 162; 50 N. W. 809; State of Iowa vs. iS'paulding, 102 lovifa 639; 72 N. W. 288. McCornick vs. Tliatcher, 8 Utah 294; 30 Pac. 91. The trustees of the Utah Agricultural College, whose appeintment is derived from the Governor, whose duty and compen- sation are fixed by Statute, and who are required to take an official oath, are considered public officers. State vs. Wilson, 29 0. S. 347. The Constitution of Ohio provides that " no person shall be elected or appointed to any office in this State unless he possesses the qualifica- tions of an elector." The defendant in this ease was a resident and elec- tor of Indiana, and was appointed as medical superintendent of a Hos- pital for the Insane. The question involved was his eligibility under the Constitution. The Court said: " Let us look at some of the indicia of his being an officer. He is ap- pointed for a definite term. He must take the oath prescribed by the Constitution. He must reside in the institution that he superin- tends- His duties are prescribed by law and not by contract. He is clothed with the right and corre- spondent duty to execute a public trust." Worthy vg. Barrett, 63 N. C. 199; Collins vs. Mayor, 3 Hun 680. " We see no reason to doubt that the plaintiff was an officer. His duties were those pertaining to an office. He was required by ordi- nance to take, and did take, the offi- cial oath; and he was amenable to all the penalties of statute for neg- lect or violation of official duties. Probably the true test to distin- guish officers from simple servants or employees, is the obligation to take the oath prescribed by law.'' Lindsey vs. Attorney General, 33 Miss. 508. The omission by the legislature to prescribe an oath of office as a condition of the franchise of an office will not change what would otherwise be an official position to non-official. Such lack of require- ment for oath of office, while consti- tuting legislative oversight and neg- lect, does not of itself affect the OITICIAL BONDS. 241 A further indicia of public oflBce is where the duties pre- scribed by the Statute are those which belong to the position irrespective of the person who performs the service. '' A Notary Public is a public officer.* An Attorney at Law, by reason of the public character of his service in the admin- istration of justice, and the oath he is required to take, has been deemed a public officer.' It has been said that the test of public office is that it is created by the law-making power, and is a part of the admin- istration of government,' and that the term public office includes all persons appointed or elected to discharge a public duty.' §146. The duty of a public officer to give a bond arises from statute. There is no common law requirement that a public officer shall give a bond as a condition of entering upon the duties of his office. character and status of the employ- ment. State vs. Kennon, 7 0. S. 559; Commissioners vs. Evans, 74 Pa. 124. s State vs. May, 106 Mo. 488 ; 17 S. W. 660. People vs. Eathbone, 145 N. Y. 434; 40 N. E. 395. The question in- volved In this case is whether a Notary Public came within the pro- hibition of the Constitution of the State of New York, providing that public officers shall not use a pass upon a railway. The Court said: ■' The People have plainly declared in precise and unambiguous words that no public officer shall receive or make use of a pass, and within the territorial limits of the State, that command is enforcible, and it must be obeyed by every person who holds an office, which, like the one before us, is public in its relation to the body politic, by reason of the mode of its creation and of the powers conferred and functions de- fined by law." State vs. Clarke, 21 Neiv. 333; 31 Pac. 545. In Nevada the Con- stitution provides: "No person holding any lucrative office under the Government of the United States or any other power, shall be eligible to any civil office of profit under this State." And it was held ths,t a Federal officeholder was not eligible for appointment as notary public by reason of this constdtu- tional limitation. Governor vs. Gordan, 15 Ala. 72. 7 White's Case, 6 Mod. 18; Walmesley vs. Booth, 27 Eng. Eep. Reprint 626; In re Cooper, 22 N. Y. 67; Waters vs. Whittemore, 22 Barb. 593 ; Thomas vs. Steele, 22 Wis. 207. But see Robinson's Case, 131 Mass. 376; Cohen vs. Wright, 22 Cal. 2i93 ; Ex parte Garland, 4 Wall. 333. 8 Smith vs. Moore, 90 Ind. 2)94 ; State vs. Jennings, 57 0. S. 415; 49 N. E. 404 ; Guthrie Daily Leader va Cameron, 3 Okl. 677; 41 Pac. 635; Richie vs. Philadelphia, 225 Pa. 511; 74 Atl. 430. » Henley vs. Mayor of Lyme, 5 Blng. 91 ; Rowland vs. Mayor, 93 N. Y. 372. 242 THE LAW OF SUEETTSHIP. The Legislature, except where restrained by the Constitu- tional provisions/" fixes by statute the terms upon which an ofBce may be granted, and in nearly all cases has required that the officer give a bond, and either fixes the amount of the pen- alty, and other conditions, such as the time within which it must be given, and the number and qualifications of the sure- ties, or delegates to some public officer the function of deter- mining the conditions under which a bond will be accepted/^ A public officer is liable for a breach of his official duties, and such liability may be enforced even though he has not given a bond. The remedy upon his bond is cumulative, and the officer may be sued for his misconduct without joining hia sureties. Statutory provisions requiring bonds have therefore furnished additional safety and protection to the people vntli- out abridging their rights under the common law.^^ Although a bond does not conform to the requirements of the statute, if accepted and the officer enters upon the duties of his office, the undertaJdng will be binding.^^" Thus where the statute fixes the amount of the penalty, and the bond is given for a larger sum, it will be valid at least to the amount of .the required penalty.^' Or where the statute re- quires several sureties, and requires each to make himself liable for the entire penalty, and the bond is accepted with stipulation that each surety is to be liable for only a pro rata part of the penalty.^* It is not necessary that the conditions of the bond be recited in the exact language of the statute. Words which express the substance or intent of the statute will be sufficient compliance with the law."" 10 The Federal Constitution, and 12o Carter vg. Fidelity & Deposit the Constitutions of the States, fix Co., 134 Ala. 369; 32 So. 632; U. iS. the tenure of office in many cases. f' ^ ^- ^f^J'^^^lfo '^V^^l^ f??' , , „ . , Tc 4.- c i ^"S^ ^°-' 142 Ala. 532; 38 So. 177; also define the qualifications of of- Higdon vs. Fields, 6 Ala. App. 281; floeholders, but do not require offl- 60 iSb. 594. cial bonds. l' Graham vs. iState, 66 Ind. 386 ; " In Ohio the county treasurer is United States vs. Mynderse, 11 required to give a bond in such fjoj." +' . t> n i^ t /m \ ,,, 5„,,,, , i^btate vs. Polk, 14 Lea (Tenn.). sum as shall be fixed by the county 14oU. S. F. & G. Co. vs. Poetker, commissioners. 102 N. E. 372; 180 Ind. 255; L. r! 12 Gale Co. vs. Pallmeyer, 101 Mo. A. 19170, 984, and note, "Effect 67- 13 S. W. 687. "^ insertion of unauthorized provi- ' • • • gjjjj^ jj^ ^ hoai. required by statute." OFFICIAL BOHDS. 243 Where the statute required a Justice of the Peace to enter into a bond " conditioned that he will well and truly do and per- form every ministerial act that is enjoined upon him by law " it was considered a substantial compliance to recite in the bond that the Justice " shall well and truly discharge the duties of Justice of the Peace according to law," although this language, in terms, apparently included the judicial as well as the minis- terial acts of the Justice." The giving of a joint bond, when the statute requires it to be joint and several, was held to bind the sureties." Where the statute requires the bond to be executed under seal, the omission of the seal renders it a nullity as a specialty, but a public officer and, his sureties cannot escape liability on such an instrument, where the officer fills the position and commits de- fault while exercising his official duty. The emoluments and benefit derived by the officer from his franchise are sufficient co"nsideration to support the bond as a simple contract.^' Although there is no statutory requirement for a bond, yet where a public officer voluntarily tenders a bond which is ac- cepted, the sureties will be liable. Such contract will have all the force cf an undertaking to secure .a private obligation.^* 15 Place v». Taylor, 22 0. S. 317. " United States vs. I4nn, 15 Pet- See also People vs. Love, 19 Cal. ers 290. 676. The Statute required the bond See also Rutland vs. Paige, 24 to run to the people of the State of Vt. 181; Boothbay vs. Giles, 68 Me. California, and the bond instead 160; United States vs. Bradley, 10 was executed " to the State of Cali- Peters 343 ; Sooy vs. The State, 38 fornia." N. J. L. 324. See also Huffman vs. KoppeUsom, is State vs. Harney, 57 Miss. 863 ; 8 Neb. 344. Where the bond was United States vs. Mason, 2 Bond. given to the State, though required 183; Bank vs. Cresson, 12 Serg. & by Statute to run to the county. E. (Pa.) 306; United States vs. See also Jessup vs. United States, Rogers, 28 Fed. Rep. 607; Hoboken 106 U. S. 147; 1 S. Ct. 74; Suther- vs. Harrison, 30 N. J. L. 73; Sooy land vs. Carr, 85 ¥ Y. 105; Jones vs. The State, 38 N. J. L. 324; vs. Newman, 36 Hun 634. Ahsmuhs vs. Bowyer, 39 Okla. 376; iBT < r> J 11 o ,-1 1 coo 135 Pae. 513; 50 L. R. A. (N.lS.) isTevis vs. Randell, 6 Cal. 632; jQgQ j^^^^ t ^ ' Perkins Co. vs. Miller, 55 Neb. 141 ; Contra— S%a,te vs. Heisley, 50 la 15 N. W. 577. 404; 9 N. W. 327. 244 THE LAW OF SUEETYSHIP. It has been held that a bond which is authorized by an un- constitutional statute is invalid.^" §147. Bonds of deputies. A deputy is one who acts for another, and the acts of a deputy of a public officer are necessarily official, in all cases where the law authorizes the appointment of deputies.^" A deputy is to be distinguished from an Assistant or em- ployee of a public officer, although the latter may be authorized by statute, and their duties fixed by law. A clerk or employee does not perform official acts, although sometimes considered as public offieers.^^ But a deputy is a substitute for his princi- pal, and acts by virtue of the authority inherent in his appoint- ment, although he acts in the name of the principal ^^ except 19 Byers vs. State, 20 Ind. 47. Not necessarily. Love vs. McCoy, 81 W. Va. 478; 94 S. E. 954; L. R. A. 1918C, 832, and note. !See also Coburn vs. Tovrnsend, 103 Cal. 233; 37 Pac. 202. 20 State ex rel. vs. Bus, 135 Mo. 325; 36 S. W. 636, Macfarlane, J.: "Deputy sheriffs are appointed by the sheriff, subject to the approval of the judge of the Circuit Courts; they are required to take the oath of office, which is to be indorsed upon the appointment and filed in the office of the clerk of the Circuit Court. After appointment and qualification they 'Shall possess all the pov^er and may perform any of the duties prescribed by law to be performed by the sheriff.' The right, authority and duty are thus created by stat- ute; he is invested with some por- tions of the sovereign functions of the government to be exercised for the benefit of the public and is, consequently, a public officer within any definition given by the courts or text writers. It can make no differ- ence that the appointment is made by the sheriff, or that it is in the nature of an employment, or that the compensation may be fixed by contract. The power of appoint- ment comes from the State, the authority is derived from the law, and the duties are exercised for the benefit of the public." Dayton vs. Lynes, 30 Conn. 351; White, vs. State, 44 Ala. 409; United States vs. Martin, 17 Fed. Rep. ISO. 21 United States vs. Hartwell, 6 Wall. 385. 22 Anderson vs. Brown, 9 O. Ibl. Ib this case the deputy sheriff un- dertook to execute a, sheriff's deed in his own name as deputy. Held, "where delegated authority is ex- ercised, it must be exercised in the name of the principal. Where one acts as the attorney of another, the act should purport to be the act of the constituent. The deputies of a. sheriff compose but one officer, and they have no authority except that exercised in the name of the principal. If, then, as in this case, a deputy assume to convey lands himself in his own name, his acts are void, like those of any other agent." Glencoe vs. People, 78 111. 382 j OFFICIAL BONDS. 245 where specially authorized by statute to act Eo Nomine.'^ J udicial officers cannot act through a deputy "* but minis- terial authority may generally be exercised by a deputy. Official deputies are of two classes ; where their appointment and powers are fixed by law, and who give bond to the State or people and whose compensation is paid out of the public treas- ury ; and where their appointment, although authorized by law, is dependent upon the will of the principal, as to whether it shall be made, and whose powers and duties are such as the principal shall in his discretion delegate, and who give bond to the principal. In both cases they are public officers, and the undertakings which they furnish for their fidelity should be construed as offi- cial bonds, since the relation between the deputy and his princi- pal, in neither case, is contractual. Agreements by the principal to appoint deputies cannot be upheld as contracts, and are void as against public policy."" Rowley vs. Howard, 23 Cal. 401; Kobinson vs. Hall, 33 Kan. 139; 5 Pac. 763; Samuels vs. Shelton, 48 Mo. 444. Gibbens vs. Pickett, 31 Fla. 147; 12 South. 17, Taylor, J.: "While cur statute in express terms author- izes sheriffs to appoint deputies to act under them, who shall have the same power as the sheriffs appoint- ing, and for whose neglect and de- fault in the execution of their of- fice the sheriff shall be responsible, still there is nothing more in this Statute than a declaration of that which was common law on the sub- ject from time immemorial in En- gland and in this country, and we can see nothing in the Statute that creates in a ' deputy sheriff ' any independent distinctive official pow- er or authority, except such as he derives as deputy from and through his principal. The term ' deputy ' necessarily carries with it the idea that he has a principal, and that he can not act independently in his own name and stead, but performs all official acts of this kind in the name and stead of such principal for whom, as deputy, he is alone au- thorized to act. If he undertakes to act in his own name and on his own authority, then he no longer acts as deputy, but as an independent official recognizing no official supe- rior." 23 Eastman vs. Curtis, 4 Vt. 616 Calender vs. Olcott, 1 Mich. 344 Westbrook vs. Miller, 56 Mich. 148 22 N. W. 2o6; Gilkey vs. Cook, 66 Wis. 133; 18 N. W. 639. 24 State vs. Jefferson, 66 N. C. 309 ; Van Slyke vs. Trempealeau Ins. Co., 39 Wis. 390; Jacquemine vs. State, 48 Miss. 280. 2sHager vs. Catlin, 18 Hun 448; Stout vs. Ennis, 28 Kan. 706. But see Hoge vs. Trigg, 4 Munf. (Va.) 150. 246 THE LAW OF SUKETYSHIP. Where the statute does not fix the terms and amount of the deputy's bond, the undertaking" may be for such amount and in such form as the principal and his deputy shall agree.''* The bond is for the protection of the principal officer, and not the public ; yet it cannot well be governed in its construction by the rules that apply to. bonds to secure a private contract, be^ cause the duties and povs^ers of the deputy are subject to the same changes and limitations which affect the office of the prin- cipal. The rules of construction therefore which relate to offi- cial bonds should be applied.^' §148. Qualification and approval of sureties. Sureties upon official bonds 'must have the same contractual capacity which is required in the making of any form of con- tract, and unless they have all the necessary qualifications to make a simple contract, they are not eligible as sureties. Persons of unsound mind or who are under disability of in- fancy, or in some States, coverture, cannot become Surety.^' Not all persons, however, who have proper capacity to make simple contracts, are eligible as sureties upon official bonds. A corporation, other than those organized for the special pur- pose of making contracts in Suretyship,^' cannot become Surety, since the act would be ultra vires, it being no part of the cor- poration purpose to use the corporation in performing acts of mere friendship or accommodation to others.^" 28 Gradle vs. Hoffman, 105 111. between them in almost every re- 147. spect. The one is an official bond 2' Hubert vs. Mendheim, 64 Cal. of a public officer, the form and 213; 30 Pac. 633. conditions of which are fixed by Contra — Mullin vs. Whitmorc, 74 law; the other is a private bond of N. C. 477. an individual, for which no form is " The defendants insist that their prescribed and in which any con- bond shall be interpreted by the ditions may be inserted which will rules which govern the construction carry out the intent of the parties." of the official bonds of a high sher- 28 Ante Sec. 11. iff, drawn in pursuance of the Stat- 29 Post Chap. IX. ute, specifying what bonds shall be so That a "corporation cannot be- given and the conditions of the come an accommodation indorser or same. But there is a wide difference guarantor in commercial transac- OFFICLAX BONDS. 247 Certain other persons are prohibited by statutes from becom- ing Surety, such as provisions of law that only those residing in the same County or State where the bond is to be filed shall be accepted as Surety,"^ or statutory requirements that the Surety possess a certain amount of tangible property subject to execu- tion within the State. The approval of bonds by those given authority to determine whether the persons approved as Surety have the qualification required by law, have been held to be judicial acts.^^ There seems to be a special ground for considering the ap- proval a judicial act, in those cases where the law declares the ofiice vacant upon failure to file a bond, as refusal to approve a bond in such a case, might result in the vacation of the office.^* The approval of the bond will be presumed from its accept- tk)iis, unconnected ^ith its regular business, has been the holding of a large number of well considered cases. Bank of Genesee vs. Patchin Bank, 13 N. Y. 309, Denio, J. (314): "It is quite clear that the officers of a banking as- sociation or other corporation have no power to engage the institu- tion as the surety for another, in a business in which it has no in- terest. Such a transaction is with- out the scope of the business of the company. The authority of the gov- erning officers of a, corporation, to affect it by their contracts in its name, is of the same general charac- ter as that which a partner has to bind the firm. In either case, if they contract in a matter to which the business of the corporation or partnership does not extend, their engagements are invalid as against the corporation, for want of author- ity to conclude those in whose be- half they assume to act." Park Nat'l Bank vs. German, etc.. Co., 116 N. Y. 281; Lafayette Sav- ings Bank vs. St. Louis Stoneware Co., 2 Mo. App. 299; Culver vs. Reno Real Est. Co., 91 Pa. 367 ; Lu- cas vs. White Line Transfer Co., 70 Iowa 541; 30 N. W. 771; Hall vs. Auburn Co., 27 Cal. 256. 31 Sureties will be estopped from claiming their non-residence as a defense. Board of School Directors vs. Brown, 33 La. Ann. 383; State vs. Flinn, 77 Ala. 100. 32 State vs. Dunnington, 12 Md. 340; Ex parte Harris, 52 Ala. 87; Swan vs. Gray, 4'4 Miss. 393; Bay Co. vs. Brock, 44 Mich. 45; 6 N. W. lOL But see Boone Co. vs. State, 61 Ind. 379. Holding that the refusal to approve a bond is a ministerial act and that mandamus will lie to compel the officer to approve the ' bond or show cases why he does not. See also Speed vs. Common Coun- cil, 97 Mich. 198; 56 N. W. 570. 33 Knox Co. vs. Johnson, 124 Ind. 145; 24 N. E. 148. 248 THE LAW OF SUEETYSHIP. anee and retention without objection.'* Failure to approve a bond does not constitute a defense to the Surety/* §149. The signing of the bond by the principal. The omission of the name of the principal as one of the sign- ers of an official bond, even v?here his name appears in the body of the instrument as an obligor, is a mere technical defect and will not release tbe Surety except in. tbose cases where .the Surety signs upon condition, known to the obligee, that the bond is not to take effect until signed by the principal. The Sureties are not injured by the failure of tbe principal to sign, if they are compelled to pay the penalty of tbe bond because of the default of the principal, they can recover the amount back from the principal whether he signed the bond or not.^" Where the bond is accepted and approved without the signa- ture of the principal and tbe latter enters upon his office by reason of the reliance of the obligee upon the bond, it would be giving the Sureties tbe benefit of tbe contract without imposing its burdens to permit them to escape liability.^^ It has been held that where the statutes require the principal to sign, that the instrument is incomplete without bis signature, and does not bind the Sureties except where the obligee is able to show affirmatively that tbe Sureties intended to waive the execution by the principal."* 34 Postmaster Gen'l vs. Norvell, known to the obligae, it was consid- Gilp. 106 ; Pierce vs. Ridiardson, ered that the failure of the principal 37 N. H. 306. to sign constituted a valid defense. 35 Bojne Co. vs. Jones, 54 Iowa Empire State Surety Co. vs. Car- 669 ; 2 N. W. 987 ; Trustees vs. roll Co., 194 Fed. 583 ; 114 C. C. A. Sheik. 119 111. 579; 8 N. B. 188; 436., Holding that where the prin- Mowlbray vs. State, 88 Ind. 324; cipal, in the absence of a bond, Young vs. State, 7 Gill & John. would nevertheless be liable for the (Md.) 253; People vs. Huson, 78 acts constituting the breach, the €al. 154; 20 Pac. 369; Paxton vs. failure of the principal to sign does State, 59 Neb. 460 ; .81 N. W. 383 ; not relieve the surety, even though Estate of Eamsay vs. People, 187 • the bond recites a joint obligation. 111. 572; 64 N. E. 549: Deer Lodge 37 MoLeod vs. State, 69 Miss. 221; County vs. U. S. F. & G. Co., 42 13 South. 268: Hall vs. State, 69 Mont.'315; 112 Pac. 1060. Miss. 529; 13 South. 38. 36 Trustees vs. Sheik, 119 111. 579; ss Johnston vs. Kimball. 39 Mich. 8 N. E. 188: Deer Lodge C anty vs. 187, Ocumpbell, G. J.: "Where sev- U. S. F. & G. Co., 42 Mont. 315; 112 eral names are written as co-obli- Pae. 1060. In which it was also gors and one of them is called upon held that w'here the siifming of a to sign it, he does so upon an iip- bond was upon condition that the plied understanding that he can In principal sign, which condition was OFFICIAL BONDS. 249 It is also held that if the bond recites a joint obligation, nam- ing the principal as one of the joint obligors, the instru- ment does not take effect against any of the parties until the principal signs.*' §150. Liability of sureties as affected by failure to deliver or furnish the bond within the time required by law. The statutes of the various States have provided with much uniformity the time within which a person elected or appointed to a public office must submit his bond for approval. These statutes usually add as a penalty for failure to give the bond that the office shall become vacant. A difference of construction prevails whether the statutes as to the penalty creating a vacancy are mandatory or merely direc- tory. If the former, then at the expiration of the limit fixed by statute, the office is forfeited without judicial determination, and the tender and acceptance of a bond after such date will not revive the office nor involve any liability upon the bond, and on the other hand, if the statute is merely directory the bond may be filed on a later day, and if approved the nominal infraction of law will be deemed waived. The preponderance of authority supports the view that al- though the statute recites in plain terms that the office shall be- case of being held responsible, not It was claimed on the argument that only have his right to contribution, the sureties would have a right of but a further right to have it cap- contribution against the treasurer able of proof and enforcement ac- at any rate, whether he did or did cording to the terms of the contract not sign the bond with them. This as it purports to be drawn up. And may be true, but if he had signed he has right to insist that he will the bond, he would not only be es- not be bound except upon his own topped by the judgment from con- terms, reasonable or unreasonable. testing his liability, but the sure- It is for himself and not for others ties could require recourse to his to determine these terms. And if it property to satisfy the execution be- is claimed he has waived them, or fore seizure of theirs. These are become estopped from relying on not barren advantages." them, the burden of proof ought not See also Bean vs. Parker, 17 Mass. to be laid upon him to show that 603; Ferry vs. Burchard, 21 Conn, there has been no variance, but upon 597 ; Bunn vs. Jetmore, 70 Mo. 228. the plaintiff to show what is sub- s* People vs. Hartley, 21 Cal. 585. atantially a new contract. . . 250 THE LAW OF SUEETTSHIP. come vacant by failure to deposit the bond within th© time pre- scribed by law, yet such failure does not ipso facto create a va- cancy nor prevent the officer from thereafter qualifying, pro- viding tbe bond is furnished before steps are taken to declare the office vactent. In reaching this conclusion, the courts have many times dis- regarded what seems to be the clear and unambiguous language of the statute in order to give effect to the maxim of the coromon law that " forfeitures are never favored." *° *o state vs. Kuff, 4 Wash. 234; 29 Pao. 999, Hoyt, J. : " Under our statute it is the election which gives the right to the office, and the quali- fication is only an incidental require- ment for the protection of the pub- lic. If the provisions for such quali- fication are not timely complied with the public can protect itself by declaring a vacancy and filling the same by appointment, but until such acts have been done, the force of the election has not been exhaust- ed, and upon compliance with the incidental duty of qualification is given full force." The statute upon which this construction is based pro- vides that " Every office shall be- come vacant on the happening of either of the following events before the expiration of the term of such officer: .... Sixth, his refusal, or neglect to take his oath of office, or to give or renew his official bond, or to deposit such oath or bond within the time prescribed by law." The dissenting opinion in this case states clearly the opposing view. " I am unable to agree with the ma- jority. Nor do I think that a plain statutory enactment setting forth specifically circumstances under which an office becomes vacant should be construed out of existence by the mere statement of the theo- retical rule that ' forfeitures are ab- horred by the Courts.' What the courts abhor should be of very little consequence. The vital question it,, what did the Legislature intend? I think it an excellent idea for courts to give the statutory language its plain and ordinary meaning It seems to me that if the legisla- ture had desired to enact that an office should become vacant upon the refusal or neglect of the officer- elect to take his oath of office or to give or renew his official bond with- in the time prescribed by law, it could not have expressed itself in language more clear or unambigu- ous. Nothing is said about a ' for- feiture being declared by the proper authority,' that is an idea expressed by the majority opinion, but it is not found anywhere in the law." See also, Chicago vs. Gage, 95 111. 593 ; People vs. Holley, 12 Wend. 481; State vs. Churchill, 41 Mo. 42; State vs. Falconer, 44 Ala. 696; 'State vs. County Court, 44 Mo. 230; Kearney vs. Andrews, 10 N. J. Eq. 70; State vs. Colvig, 15 Ore. 57; 13 Pac. 639; Ross vs. Williamson, 44 Ga. 501; Paxton vs. State, 59 Neb. 460; 81 N. W. 383. In South Carolina the statute re- cites that upon failure to file a bond within a specified time the "office ehall be deemed absolutely vacant," and it is held that the failure to file the bond does not ipso facto va- OFFICIAL BONDS. 251 If an officer though in default tenders his bond, and it is ac- cepted, the public by this act waives the right to declare the office forfeited.*^ Where the statute provides that the office shall become vacant by failure to file a bond, although such statute is construed to be merely directory, it is held that a judicial determination of the existence of a vacancy is not necessary, and that an appoint- ment to fill the vacancy thus created may be made as soon as the limit expires for filing the bond.*^ The statute in some instances provides that the failure of the officer to file his bond, ipso facto, works a forfeiture of the office. A statute in this form creates a vacancy vdthout judicial de- termination.** The literal provision of the statute has been followed by some courts which hold that the requirement for filing the bond within a specified time is mandatory, and supersedes the com- mon law rule that forfeitures are not favored.** cate the office. State vs. Toomer, 7 Rich. Law Rep. 216; Cronin vs. Stoddard, 97 N. Y. 271. "Schuflf vs. Pflanz, 99 Ky. 97; 35 S. W. 132. " Upon the failure to execute any bond required of this official, for the protection of the State, county or citizens, the county court may remove him from office; and particularly vfhere by statute it is made the plain duty of the official to execute the bond on a particular day. The duty thus devolves on the sheriff and he must comply with the law; but it does not follow because the sheriff fails to renew his general bond or to give an annual bond for the collection of the revenue that the county judge is powerless to ac- cept a bond after the first Monday in January. He may, it is true, vacate the office, but before he does this he accepts a bond .... and when accepted, the sheriff having Jreviously qualified, it is then too late to enter an order vacating the office." Cawley vs. People, 95 111. 249. 42 State vs. Tucker, 54 Ala. 205; State vs. Lansing, 46 Neb. 514 ; 64 N. W. 1104. But see Cronin vs. Stoddard, 97 N. Y. 271. 43 State vs. Beard, 34 La. Ann. 273. 44 People vs. Perkins, 85 Cal. 509 ; 26 Pac. 245; Johnson vs. Mann, 77 Va. 265; In re Atty. Gen., 14 Fla. 277. See also Falconer vs. Shoves, 37 Ark. 386. The holding in this case is that the failure to tender a bond gives to the officer holding the ap- pointing power the right to immedi- ately appoint another to the office, and that the tender of a bond after the appointment has been made will not restore the claimant to the office so forfeited. 252 THE LAW OF SURETYSHIP. If the officer fails to make a seasonable delivery of his bond, and defaults occur after entering upon the duties of his office, but before the bond is approved, the sureties will be liable, where the language of the bond covers the term of office, either by specifying the date of the beginning of the term or by the use of such words of general description as may fairly be interpreted to mean the entire term/° §151. Sureties upon official bonds discharged by alterations to which they do not consent. While it may be asserted that the law does not favor a for- feiture in the matter of official bonds, such a rule will not be extended so as to violate any fixed contract right of the Surety. The interests of the public require that a bond to secure the performance of official duty shall be made effective if possible, and not defeated by a mere technicality involving no hardship upon the Surety, such as a failure to file a bond on the exact day required by law, as considered in the preceding section. But public interest must yield to individual rights, and it is the right of any contracting party, and especially an obligor in suretyship, to stand upon the strict letter of his undertaking. An alteration of a bond by decreasing the amount of the penalty violates the right of the Surety as much as if the penalty had been increased, and it is immaterial that the one benefits the Surety by reducing his burdens.*^ An immaterial change in the bond, which neither adds nor takes away any obligation, will not release the Surety.*^ *5 Hatch vs. Attleborough, 97 State vs. Berg, 50 Ind. 496. In Mass. 533. this case, the bond of a township «6 Board of Commissioners vs. trustee recited that the principal Gray, 61 Minn. 242; 63 N. W. 635; should render an accounting to the Miller vs. Stewart, 9 Wheat. 680. Board of Commissioners " at its See also People vs. Brown, 2 March term, 1868." This was al- Doug. (Mich.) 9; Mitchell vs. Bur- tered by the addition of the years ton, 2 Head (Tenn.) 613; Doane "1869 and 1870." This was held vs. Eldridge, 16 Gray 254. an immaterial alteration. This hold- distiller in compliance with the Federal Statutes, conditioned that he will observe the law in relation to the business of distilling. United IStates vs. Powell, 14 Wall. 493. BSKing vs. Nichols, 16 0. iS. 80. Stee also Marney vs. State, 13 Mo. 7. 54 Dawson vs. State, 38 0. iS. 1. iSee also Commonwealth vs. Holmes, 25 Gratt. 771; United States vs. McCartney, 1 Fed. Rep. 104; Prickett vs. People, 88 111. 115. OFFICIAL BONDS. 255 pay over to his superior officer the money collected by him ; sub- sequently, and after the execution of his bond, he was required by the United States to disburse funds in his hands for pur- poses outside the scope of his duties as collector, such as the building of a Marine Hospital and the furnishing of supplies to the naval service. It veas held that the Sureties would not be liable for defaults in the performance of the new duties, but would be liable for the obligations originally created.^^ An increase or diminution of the compensation of a public officer will not release the sureties upon his bond.°° The implied assent which the obligors upon official bonds are deemed to give, that they will be bound for all added duties which the legislature may impose, is necessarily limited to those 6' Gausaen vs. United States, 97 U. S. 584, Strong, J.. "The first special plea requires a more minute examination. It was, in effect, that the obligation of the bond had been discharged, not directly, but because the principal obligor had been re- quired to perform, and had per- formed, duties additional to those which pertained by law to his of- fice when the bond was made. It does not aver that the additional duties changed the character of the office, or increased the responsibility of the collector for the money re- ceived by him as collector of cus- toms. How, then, the requisition of duties not inconsistent with account- ing for and paying over money re- ceived by him as collector of cus- toms can operate to release his bond is quite incomprehensible. If it be conceded, as it may be, that the addition of duties different in their nature from those which be- longed to the ofiice when the official bond was given will not impose up- on an obligor in the bond, as such, additional responsibilities, it is un- doubtedly true that such an addi- tion of new duties does not render void the bond of the ofScer as a security for the performance of the duties at first assumed. It will still remain a security for what it was originally given to secure." See also Board of Supervisors vs. Clark, 92 N. Y. 391. But see Pybus vs. Gibb, 6 Ell. & Bl. 902. In this case the juris- diction of a bailiff was increased whereby new duties were imposed with additional fees, held — " It may be considered settled law that, where there is a bond of suretyship for an officer, and by the act of the par- ties or by Act of Parliament, the nature of the office is so changed that the duties are materially al- tered, so as to affect the peril of the sureties, the bond is avoided." The English rule stated above has not been adopted in the United States and has been somewhat modified in the later English cases. Mailing Union vs. Graham, 5 L. R. C. P. 201; Skillett vs. Fletcher, 1 L. R. C. P. 217. CO Sacramento Oo. vs. Bird, 31 Cal. 66; Loving vs. Auditor of Public Accoamts, 76 Va. 942. 256 THE LAW OF SUKETYSHIP. changes which create new duties of the same general character, it cannot be said that parties to such transactions make their contract in contemplation of the power of the legislature to im- pose duties requiring different qualifications to perform, and involving exposure to defaults which could not occur under the original scope of the office.'^ §153. Extension of tenure of oface by legislative act. The extension of the Tenure of Office by act of the Legisla- ture differs in principle from those cases in which additional duties are imposed upon a public officer. It is essential for the protection of the rights of parties to contracts that the obligation terminate at a definite time, and while the Legislature has the power to extend the term it also has the power to provide that the officer give an additional bond for the new or extended term. The limit as to time- is as important to sureties upon official bonds as the limit in amount, and the Legislature cannot ex- change either stipulation in the surety's contract without his consent."* 57 Denio vs. State, 60 Miss. 949. in degree, merely different from In this ease a clerk of the court those before pertaining to the office, was required, by an act subsequent and leaves the office unchanged in to the execution of his bond, to col- its functions, the bond before given lect a license fee from attorneys may be fairly held to be a security, and pay the same over to the county while for any duty, not pertinent treasury, held — " The distinction is in its nature to the office as existing between an increase by the Legisla- when the bond was given, it can- ture of the duties of an office of not be justly said to have been the same nature or like kind as within the contemplation of the those before pertaining to it, after obligators that they should be bound the execution of the bond, and the for them, and they are not so addition of new duties, not of the bound." same nature or kind with those be- See also County of Spokane vs, fore belonging to it. Every official Allen, 9 Wash. 229; 37 Pac. 428 bond is executed with a knowledge White vs. East Saginaw, 43 Mich, of the right, and the practice of the 567 ; G N. W. 86 ; ' District of Co Legislature, to enlarge the duties lumbia vs. Pelty, 37 App. D. C. 156 of the officer, and for every addition- ^s Peppin vs. Cooper, 2 Bam. & al duty imposed by competent au- Aid. 431; Bigelow vs. Bridge, 8 thority, which is not in kind, but Mass. 274; Moss vs. State, 10 Mo. OFFICIAL BONDS. 257 Where the bond recites that it covers the term of office, and until the successor of the principal is elected and qualified, it is sufficiently definite to bind the sureties and they will be liable for defaults for a reasonable time beyond the termination of the statutory term.^* The necessary delay in the qualification of the successor in office, arising from accident or other cause, might be consid- ered as within the contemplation of the parties, but a consent to an extension of the term cannot fairly be implied from such contract. But where an appointment is to a permanent office having a definite and limited term, the obligation of a surety is not extended beyond the term for which the appointment is made though the statute provides for his continuation in office beyond the term.^^" §■154. Special bonds given by officers who have also given gen- eral bonds. Where a public officer who has already given bond, is required by law to give additional bond to secure the performance of some special duty, the General Bond is not liable for defaults in the matter of the special duty, neither is the Special Bond liable for acts in the line of the general duty of the officer. Without the requirement and acceptance of the Special Bond the sureties upon the General Bond in many instances would be liable for defaults* in the performance of new and special duties added to the office after the making of the bond."" , But the 338; State Treasurer vs. Mann, 34 son vs. State, 37 Miss. 518. These Vt. 371; Patterson vs. Freeland Tp., eases arise under a statute provid- 38 N. J. L. 255; Miller vs. Stewart, ing that a public officer shall hold 9 Wheat. 680 ; Dover vs. Twombly, over until his successor shall qualify. 42 N. H. 59; Smith vs. United Where there is no such statute the States, 2 Wall. 219; Welch vs. Sey- rule has not always been applied. ■ mour, 28 Conn. 387 ; Brovpn vs. Lat- Illinoiis Industrial Home vs. Dreyer, timore, 17 Gal. 93; King Oo. vs. 150 111. Ap.p. 574. Ferry, 5 Wash. 536; 32 Pac. 538; Norridgewock vs. Hale, 80 Me. MuUikin vs. State, 7 Blackf^d 362; 14 Atl. 943. lawfully performed it to the injurj of another." To the same effect see Clancy VB. Kenworthy, 74 la. 740; 35 N. W. 427. "If, in exercising the func- tions of his office, defendant is not liable for acts because they are il- legal or forbidden by law, and for that reason are trespasses or wrongs, he can not be held liable on the bond at all, for the reason that all violations of duty and acts of oppression result in trespasses or wrongs. For lawful acts in the dis- charge of his duty, he of course is not liable. It follows that, if de- fendant's position be sound, no ac- tion can be maintained on the bond in any case." See Greenius vs. American iSurety Co., 92 Wash. 401 ; 159 Pac. 384; L. R. A. 1917F, 1134. Cash VB. People, 32 III. App. 250; Hufi'man vs. Koppelkom, 8 Neb. 344; Hall vs. Tierney, 89 Minn. 407; 95 N. W. 219; Lee vs. Charmley, 129 N. W. 448; 20 N. D. 570; Mc- Olemiy vs. Inverarity, 80 Kan. 569; 103 Pac. 82. But see Forest County vs. United Surety Co., 149 Wis. 323; 136 N. W. 335; Jones vs. Lucas Co. Com- missioners, 57 0. S. 1'8'9; 48 N. E. 882. 103 Brown vs. Weaver, 76 Mi^. 7; 23 South. 388. See also Stephenson vs. Sinclair, 14 Tex. Civ. App. 133 5 36 S. W. 137. In this case the officer fired on the escaping prisoner and killed the horse on which the prisoner waa mounted, and it was held that al- though the shooting was unlawful, the sureties on the bond of tlie offi- cer were liable in damages for the value of the horse. 10* State vs. Bcckner, 132 Ind. 371; 31 N. E. 950. lOB Turner vs. Collier, 4 Heisk. (Tenn.) 89; MoLendon vs. State, 92 Tenin. 520; 22 S.W.200; Cornell vst People, 37 111. App. 490; Gerber vs. Ackley, 32 Wis. 233 ; State vs. Mc- Donough, 9 Mo. App. 63. Governor vs. Pearce, 31 Ala. 465. But the rule in Alabama is now modified by Statute, and the sureties of an officer are liable for dajnages resulting from the service of a void process. (Ala. Beiv. Code^ Gee. 3087). Oi'JflCIAL BONDS. 274 §165. View that sureties are not liable for wrongs of sherifl or constable committed colore officii. The doctrine is announced in some cases that where an officer does that which he has no power to do, as when he acts outside the scope of his authority, he is a mere trespasser and his acta cannot properly be termed official misconduct, hut rather un- oiBcial or individual misconducts That a writ of execution or attachment gives him authority to levy upon the property of the debtor named in the writ, but it gives him no color of authority to seize the property of a stran- ger to the writ. It is urged that the Bond is to protect the parties in interest against damages resulting from a failurfe to obey the commands of the writ, and from the consequences of levying upon the de- fendant's property in an improper manner or the doing of some irregular or unlawful thing in connection with the seizure of the defendant's property, but that it does not cover, either by its terms, or by necessary implication, any acts of the officer which are not official, in the sense that he is authorized to do them either by law or the special commands recited in a judicial process, and that there is no more reason for holding the sure- ties liable for damages resulting from a levy upon the property of a person not named in the writ, an act which is wholly un- authorized, than there would be for holding them liable for losa resulting from a burglary committed by the officer. A leading case of this class states the view that " official acta are those which are done by virtue of the office; such as, if properly done, exculpate both the officer and his sureties from responsibility, but which, if neglected or improperly done, render both liable. If the authority is exceeded, or the duty omitted, an action may be maintained against the officer in his Albright vs. Mills, 86 Ala. 324; For authorities maintaining the 5 South. 591. view that sureties upon an official See also Barnes vs. Whitaker, 45 bond are not liable for acts done Wis. 204. colore officii, see Post Sec. 182. Contra — Tieman vs. Haw, 49 la. 812. 280 THE LAW 0» SUEETYSHIP. official capacity, and his sureties held responsible for it. Un- official acts are such as are committed under color of the offic^ such as can not be lawfully done, and can not be justified by the official character of the sheriff, or by any process in his hands." ">' §166. Liability for loss of public money by failure of the bank used as public depository. The decided weight of authority in this Country both in State and Federal Courts is that officials having the custody of a public fund are liable for its loss even though the loss occurs without their fault or negligence. The most extreme application of this rule is where the officer acting in good faith, and exercising care in selection of a de- pository, places the fund in a solvent bank which thereafter fails. The discussion as to whether the officer and his sureties mtist respond to the loss thus occasioned has taken a wide range, 108 state vs. Conover, 28 N. J. L. 224; Ohandler vs. Rutherford, 101 Fed. 774; Imman vs. Sherrill, 116 Paic. 426; 29 Okl. 100; State vs. Mankin, 70 S. E. 764; 68 W. Va. 772. See also Stockwell vs. Eobinison, 9 Houst. (Del.) 313; 32 Atl. 528; State vs. Brown, 54 Md. 318. "The condition of the bond is, 'That he shall well and faithfully execute the office of constable.' By this contract, the sureties, guaran- tee the public against official delin- quency on the part of the officer. For any breach of official duty his bond is responsible; this is the ex- tent of liability assumed by the sureties. If he commits a wrong, not in the discharge of his official duty, he is personally liable, but his sureties ca,nnot be held respon- sible therefor; it is not within the terms of their contract." State vs. Brown, 11 Ired. (N. C.) 141. It was held in People vs. Lucas. 93 N. Y. 586, that the wrongful seizure and sale by the constable of the property of A on an execution agaiinst B is a mere trespass al- though under color of process, and does not conrtitute a breach of the condition of a bond which recites that he will pay to the person en- titled thereto "all such sums of .money as the constable may become liable to pay on account of any exe- cution." This case rests upon the special and luniteld language of the bond, and the earlier rule in this State as stated in People vs. Schuy- ler, 4 N. Y. 173, is not disturbed, wherein it was held, the sureties upon a bond conditioned that the principal should faithfully perform his duty are not liable for acts done colore officii. See Ante Sec. 181 for authorities supporting the view that the sure- ties upon an official bond are liahle for all acts done under color of office whether authorized or not. OFFICIAL BOIMDS. 281 BMaetimes turning on the special foim of the Bond, again on the wording of the statute, and often altogether on the princi- ples of public policy. A forcible argument against the doctrine of absolute liability is made in many cases, and in favor of the limited responsi- bility of a bailee or trustee where the officer acts in good faith and without negligence. The rule of common law does not hold a trustee liable for loss of trust funds except upon proof of neglect or miscon- duct,^"' and it is urged that no public necessity exists for hold- ing an officer to a more stringent liability in the absence of statutory requirement, and that the official Bond is not intended to add anything to the liability of the officer, but merely to fur- nish a security for the due performance of the obligation im- posed at common law upon a trustee, which is always satisfied when lie conduct of the trustee is fair, diligent and cautious, and that public safety requires that the large accumulation of money incident to official duty should be deposited in a bank, and that a failure to so deposit would be gross negligence,^"* and that the people and not the officer should assume the risk of such future insolvency of the depository as could not with due diligence be foreseen. In this connection it has been said : " We believe the true rule is that a public officer who receives money by virtue of i<" Such is the rule as to txecutors negligence, and are not allowed the and administrators. Noiwood vs. exercise of a reasonable discretion Harness, 98 Ind. 134; o»>at6 vs. and prudential care in the manage- Meagher, 44 Mo. 356; Moiyre vs. ment of their trusts, it will deter Eure, 101 N. C. 11; 7 S. t. 471; prudent men from assuming the of- Lehman vs. Robertson, 84 Ala. 489; fice, which in itself is sufficiently 4 South. 728; Newton vs. Busjhong, onerous and already undertaken by 22 Gratt. 628. such men with reluctance." The same rule applies as to re- See also Law's Estate, 144 Pa. ceivers. Barton vs. Ridgeway, 92 499; 22 Atl. 831; O'Connor vs. Va. 163; 23 S. E. 226; Powers vs. Decker, 95 Wis. 202; 70 N. W. 286. Loughridge, 38 N. J. Eq. 396. '■"^ In some instances trustees In Fahnestock's Appeal, 104 Pa. have been held liable for the loss of 46, it was said, adopting and quot- trust funds on the grounds that ing from Eyster's Appeal, 4 HarriSi they were negligent in failing to de- 872 ; " If guardians and trustees posit the funds in bank. Foster vs. , are to be held responsible for ali Davis, 46 Mo. 268. 282 THE LAW OF SUEETYSHIF. his office is a bailee, and that the extent of his obligation is that imposed by law ; that when unaffected by constitutional or leg- islative provisions his duty and liability are measured by the law of bailment. If a more stringent obligation is desired it must be prescribed by statute. That his official Bond does not extend such obligation, but its office is to secure the faithful and prompt performance of his legal duties." ^°° In spite, however, of the apparent justice of these holdings, and the seeming hardship of the opposing view, the doctrine which has met with the most general acceptance is that the loss of public money by a bank failure will not constitute an ex- oneration of the official bond, even though no suitable and safe place of deposit was provided by law, and the officer was not negligent in selecting the bank.^^" this bond is not to fix or define the limit of his liability, but to super- add to his personal responsibility the security of his bondsmen, and the liability of both principal and sureties under the bond is fixeld by the laws relating thereto." 110 Tillinghast vs. Merrill, 151 N. Y. 135; 45 N. E. 375; Fairchild vs. Hodges, 14 Wash. 117; 44 Pac. 125; State vs. Moore, 74 lilo. 413; Omro Supervisors vs. Kaine, 39 Wis. 468; Havens vs. Lathene, 75 N. C. 505; Inglis vs. State, 61 Ind. 212; Rose vs. Douglass Tp., 52 Kan. 451; 34 Pac. 1046; GriflBn vs. Levee Comrs. 71 Miss. 767; 15 S&uth. 107; Nason vs. Poor Directors, 126 Pa. 445; 17 Atl. 616; State vs. HiU, 47 Neb. 456; 66 N. W. 541; Lowry vs. Polk Ctounty, 51 Iowa 50; 49 N. W. 1049; Perley vs. Muskegon Co., 32 Mich. 132; Board of Education vs. Jewell, 44 Minn. 427; 46 N. W. 914; Wilson vs. Wichita Co., 67 Tex. 647; 4 S. W. 67; State vs. Nevin, 19 Nev. 162 ; 7 Pac. 650 ; Estate of Ramsay vs. People, 197 111. 572; 64 N. B. 549 ; Mecklenburg County vs. Beales, 111 Va. 691; 69 iS. E. 1032; 36 L. R. A. (N.S.) 285; People vs. Me- Grath, 279 111. 550; 117 N. El 74. Where the statute makes it the 100 Wilson vs. People, 19 Colo. 199; 34 Pac. 944. In this case the Court, commenting on the faafcs, said: "From the agreed facts it appears that the money was lost through no fault of the clerk. He deposited the money in a- bank of reputed solvency, as clerk of the court, and in doing so, acted as pru- dent men ordinarily do wiith their own funds." See also State vs. Copelamd, 96 Tenn. 296; 34 S. W. 427, Wilkes, J.: "If a public officer is held to be an insurer against loss when he exer- cises the utmost diligence, caution and good faith, it will result that no man of any financial standing or business prudence would accept a public trust which involves the handling of public money. There would be but little inducement to act honestly -and in good faith, since neither would avajil against an un- foreseen and unavoidable casualty. .... The measure of the tru^ee's liability is fixed by the laws relait- ing to his office, and not merely by the terms of the bond, anid there is no unconditional obligation to pay ■under any and every contingency. The primary object and purpose of OFFICIAL BONDS. 283 The doctrine of absolute liability does not depend upon the hypothesis that the oflScer is a debtor, and the owner of the .fund, but rather that he is a special bailee, and that public policy requires the officer to assume the risks incident to the custody of large sums of money, and that any other rule must inevitably lead to the perpetration of great fraud, by making it possible for combinations between officials and depositaries resulting in unlawful conversions for which there could be no civil redress. The measure of duty imposed by this public policy, and by the necessity for full protection, is greater than need be applied in a mere trust or ordinary bailment for hire. The view has been expressed in at least one reported case that the liability upon the sureties is to be determined wholly from the language of the Bond, and the statute prescribing the duties of the officer, and not upon any construction founded upon public policy, and that if the statute requires the officer to " receive and keep all moneys " and the Bond provides that the officer will " justly account for all moneys coming into his hands " that the law will not extend the strict and literal mean- ing of this language, and that the undoubted meaning of the words, " justly account," is an accounting according to law, and if the law requires him to " keep " the funds, but does not in terms require the officer to keep them " safely," that a court has no right to impose an absolute responsibility upon the Bond by implying the word " safely." ^^^ duty of the officer to deposit the funds. That word " safely " which public funds in a bank, it is held has cut so important a figure in the that the officer is not liable upon majority of the cases is absent from his bond for loss resulting from the our statute. Does the requirement insolvency of the bank, if he uses that he shall receive and keep, mean, due care in selecting the depository. intrinsically, as used in the section. City of Livingston vs. Woods, 20 the same as " keep safely "?.... Mont. 91; 49 Pae. 437. The Court has no sort of authority m State vs. Gramm, 7 Wyo. 329; to make a contract between the 52 Pae. 533, Potter, Ch. J. : " It is State and these defendants. The eon- observable that the statute does not tract, whatever It is, has already expressly state that the treasurer been made. The Court has no right shall keep " safely " the public to impose upon the defendants any 284 THE I.AW OF STJEETYSHIP. §167. Liability for loss of public money by theft or robbery. An early authoritative case defining the liability upon au official Bond where the public funds were feloniously stolen, higher degree of responsibility than the legislature has done, and by their bond they have assumed. If by the intrinsic purport of the stat- ute, the duty is not imposed upon the treasurer to keep safely the pub- lie funds, without exception, it would exceed the judicial prerogative to force such duty upon him. The duty of the Court is merely to con- strue and interpret the statutes, and not to make them The con- viction is forced upon us that the duty imposed upon the treasurer by statute and all reasonable impli- cations therefrom was that he should have the custody of the money of the State and should ex- ercise a diligent and prudent care over the money, but in a high de- gree, and should also bring to the performance of such duty strict fidelity and faithfulness. And it therefore follows that by the bond neither the treasurer nor his sure- ties undertook any greater respon- sibility for the reason that they con- tracted that the treasurer should justly and truly account for the public moneys, which accounting we hold means according to law." Corn, J., (dissenting): "Some stress is laid upon the circumstance that while some statutes, under which the treasurer has been held to strict liability, provide that he shall ' safely keep,' the word safely is omitted from ours, and it is argued that the latter indicates requirement of a smaller degree of responsibility. .... In Iowa township treasurers are required by the statute to give bond ' conditioned for the faithful performance of their duties.' The same act makes it the duty of the treasurer to hold all moneys belong- ing to the district." Commenting upon the case of Dis- trict of Taylor vs. Morton, 37 Iowa 553, Construing the Iowa statute the dissenting opinion continues — " The Court did not recognize the nice dis- tinction relied upon in the majoi'ity opinioU in this case, that to ' hold safely ' might be construed as a contract to hold without loss, while the obligation to ' hold ' is to hs shaded down into a contract to use due care and diligence in holding. But it pointedly rejects such inter- pretation of the requirement to hold the money, although, as in our own statute, the word is entirely un- qualified by safely, securely, or any word of like import While there are several cases wherein the statute or the bond sued on em- ployed the expression ' safely keep ' or ' keep safely,' there is, as I be- lieve, no reported case sustaining the distinction which seems to be relied upon by the majority of the court for the decision of this case. This view has been frequently insist- ed upon by counsel, but so far as the cases have come to my knowledge, has in every instance been rejected by the courts." In Kansas the statute requires the officer to " receive and take charge " of the funds without any qualifica- tions as to " safely " keeping, held in Rose vs. Douglass Tp., 52 Kan. 452; 34 Pac. 1046. " By accepting OFFICIAL BONDS. 285 without fault or negligence on the part of the officer, held that " public policy requires that every depositary of the public money should be held to strict accountability. Not only that he should exercise the highest degree of vigilance, but that ' he should keep safely ' the moneys which come to his hands. Any relaxation of this condition would open the door to frauds, which might be practised with impunity. A depositary would have nothing more to do than to lay his plans and arrange his proofs, so as to establish his loss, without laches on his part. Let such a principle be applied to our postmasters, collectors of customs, receivers of public moneys, , and others who receive more or less of the public funds, and what losses might not be anticipated by the public? ... As every depositary re- ceives the office with a full knowledge of its responsibilities, he can not, in case of loss', complain of hardship. He must stand by his bond and meet the hazards which he voluntarily in- curs." '" This holding by the highest tribunal in the land exercised great influence upon the courts for many years.^^' It has not, however, always been followed by the more recent decisions.^'* the office of township treasurer McN. cock vs. Hazzard, 12 Cush. 112; assumed the duty of receiving and District of Taylor vs. Morton, 37 safely keeping the money of the Iowa 550; Union Township vs. township and paying it out accord- Smith, 39 Iowa 9 ; Eedwood Co. vs. ing to law. He or his sureties are Tower, 28 Minn. 45 ; 8 N. W. 907 ; bound to make good any deficiency State vs. Lanier, 31 La. Ann. 423. which might occur in the funds i" State vs. Houston, 78 Ala. which come under his charge, wheth- 576 ; Cumberland vs. Pennell, 69 Me. er they were lost in the bank or 357; Healdsburg vs. Mulligan, 113 otherwise.'' Gal. 205; 45 Pac. 337. 112 United States vs. Preseott, 3 There has been much comment by How. 578. the courts and legal writers upon 113 United States vs. Morgan, 11 the case of United States vs. Thom- How. 154 ; United States vs. Da- as, 15 Wall. 337, and the conclusion shiel, 4 Wall. 182; Boyden vs. Unit- generally reached is that in this ed States, 13 Wall. 17; United case the Federal Supreme Court States vs. Jones, 36 Fed. Eep. 759; abandons the extreme view taken State vs. Harper, 6 0. S. 608; Hal- in United States vs. Preseott, ubi bert vs. State, 22 Ind. 125; Morbeek supra. The United States sued vs. State, 28 Ind. 86; Muzzy vs. Thomas and his sureties upon his Shattuck, 1 Denio (N. Y.) 233; bond as surveyor of the customs at Comm. vs. Comly, 3 Pa. 372; Han- Nashville. The bond was in the 286 THB LAW OF SUEBTYSHIP. The doctrine that loss resulting from irresistible superhuman force, such as a public enemy or by the act of God, will not bs chargeable either to the officer or to- his sureties, may now be de- usual form and conditioned for the faithful discharge of the duties of the office. The oflBcer was charged with a shortage and pleaded in de- fense that the moneys were seized by the authorities of the Confederate States against his will and consent, and by the exercise of military force, which he was unable to resist, and the question presented to the Court was whether the sureties were liable for the loss of public funds through seizure by an enemy of the govern- ment, and it was held that the sure- ties was not liable, and the distinc- tion is made between loss by rob- bery and theft and that which re- sults from an overruling force of a public enemy. " That overruling force arising from inevitable neces- sity, or the act of a public enemy, is a sufficient answer for the loss of public property when the question is considered in reference to an officer's obligation arising merely from his appointment, and aside from such a bond as exists in this case, seems almost self-evident." In reference to the liability upon the bond as a special contract cre- ating obligations in addition to those imposed by the law the learned Justice continues : " We do not ques- tion the doctrine so strongly urged by the counsel for the government, that performance of an express con- tract is not excused by reason of any- thing occurring after the contract was made, though unforeseen by the contracting par.ty, and though be- yond his control — ^with the qualifica- tion, however, that the thing to be done does not become physically im- possible It is contended that the bond, in this case, has the effect of such a special contract, and sev- eral cases of action on official bonds have been cited to support the prop- osition. Those principally relied on are the cases of the United States vs. Prescott and the recent cases of Dashiel, Keehler, and Boyden in this court. It must be conceded that the language used by the court, not only in the case already referred to, but in some of the other cases cited, seems to favor the rule contended for. But in none of them was the defense of overruling necessity in- terposed. They were all cases of alleged theft, or robbery, or sotae other cause of loss, which would have been insufficient to exonerate a common carrier from liability. They all concur in establishing one point, however, of much importance, that a bond with an unqualified con- dition to account for and pay over public moneys enlarges the implied obligation of the receiving officer, and deprives him of defenses which are available to an ordinary bailee; but they do not go to the length of deciding that he thereby becomes liable at all events ; although expres- sions looking in that direction, but not called for by the judgment may have been used." Several members of the court while agreeing that the sureties should be exonerated, dis- sent on the ground that the case of the United States vs. Prescott, and other cases cited, should have been expressly overruled. Miller, J. (dissenting): "I do not believe now that on sound prin- ciple the bond should be construed to extend the obligation of the de- OFFICIAL BONDS. 287 dneed from all the more recent eases as the prevailing rule both in the State and Federal Court. Such causes are considered as excluding all possibility of fraud or collusion with the officer. The distinction in principle, however, is not easily apparent, between an irresistible force applied by a public enemy in time of war, and a similar force applied by a highway robbery in time of peace. In both cases the officer is entirely without fault or negligence, and where collusion does not exist, is in each case upon exactly the same footing, and public policy does not generally require a party to be charged with the consequences of fraud merely because he is in a situation where he might have committed fraud. In at least one court the doctrine of absolute liability is ap- plied even though loss results from an act of a public enemy or an act of God."° §168. Liability against judicial officers acting without jurisdic- tion. A judicial officer acts without jurisdiction in undertaking to exercise judicial powers in matters wherein the law has not clothed him with authority to act. All acts of such officer which are not within the power con- ferred by law, and which are performed without jurisdiction either as to the subject matter or the person, are not merely erroneous but absolutely void, and if such acts result in damage to the party affected, the officer is individually liable, and his bond secures the performance of this liability. Such vsrrong- positary beyond what the law im- pie of public policy recognized by poses upon him, though it may con- the courts, or imposed by the law, tain words of express promise to which made the depositary of the pay over the money. I think the public money liable for it, when it true construction of such a promise had been lost or destroyed without is to pay when the law would re- any fault of negligence or fraud on quire it of a receiver, if no bond his part, and when he had faithfully had been given; the object of taking discharged his duty in regard to its the bond being to obtain sureties custody and safe keeping." for the performance of that obliga- us State vs. Clark, 73 N. C. -255. tion. Nor do I believe that prior to See also Thompson vs. Board, 30 these decisions there was any princi- 111. 99. 288 THE LAW OF SUEETYSHIP. ful invasion of the rights of another constitutes a judicial officer a legal trespasser. Thus where a. Justice of the Peace without authority of law issues a warrant of arrest, he is liable to an action in damages at the suit of the party illegally arrested.^" Also where a magistrate assumes without jurisdiction to try an action for assault and battery ^" or to enforce a process founded upon a judgment or sentence in a case where no juris- diction is acquired.^^' It is held that by imposing a sentence of imprisonment where the law only gives the authority to impose a fine a magistrate is liable in damages, in case the sentence is executed.^^' Generally, however, no liability attaches to a judicial officer for acting in excess of jurisdiction. If the Court has jurisdic- tion of the person and the property affected, and his order or decree exceeds in extent that which he is authorized to make, it constitutes a judicial error and not a trespass, and the remedy is in review and not in damages. A Judge of the United States Circuit Court presiding at the trial of a person indicted for embezzlement in the postal service fined the prisoner $200.00 and sentenced him to imprisonment for one year. The penalty afiixed by Congress for the offense was a fine of $200.00 or imprisonment for one year. Such judicial proceedings were thereafter had in the Su- preme Court of the United States as resulted in the discharge of the defendant from custody, and action was brought against the Judge to recover damages for false imprisonment and it was held " the case turns upon a question more easily stated than it is determined : Was the act of the defendant done as a judge? Our best reflection upon it, aided by the reasonings and con- elusions of many more cases than we have cited, has brought us 116 Truesdell vs. Combs, 33 0. S. "9 Sheldon vs. Hill, 33 Mich. 171. 186; Miller vs. Grice, 2 Rich. Law See also Patzack vs. Von Gerich- (S. C.) 27. ten, 10 Mo. App. 424. In this ease ii' Woodward vs. Paine. 15 Johns. the justice imposed a penal sentence 493. in a case where the law only con- ns Bigelow vs. Stearns, 19 Johns. ferred jurisdiction to commit, and 39. he was held liable in damages. OFFICIAL BONDS. 289 to the conclusion that as he had jurisdiction of the person s»nd of the subject matter, and as his act was not without the in- ception of jurisdiction, but was one no more than in excess of or beyond jurisdiction, the act was judicial." ^"^ The distinction between acts done in excess of jurisdiction, and acts done in the absence of all jurisdiction of the subject matter, has been pointed out in numerous cases where the ques- tion of the personal responsibility of the Judge has arisen. Where a Judge presiding at a criminal trial entered an order of disbarment against an attorney for his misconduct in a trial ; in an action for damages against the Judge, he was held not liable, although the order of disbarment was in excess of the jurisdictioii of the Court, and even though the order was en- tered maliciously. The Court had some jurisdiction in the matter for which disbarment was entered, and had jurisdiction of the person of the attorney who was charged with misconduct in the presence of the Court. The act of the Court was there- fore considered judicial and subject to review, but not to an action for damages.^^^ 120 Folger, J., in Lange vs. Bene- each should have its due weight diet, 73 N. Y. 12. Continuing the yielded to it, for thus only is a safe learned judge says ( p. 37. ) : " We equipoise reached." are not unmindful of the cousidera- 121 Bradley vs. Fisher, 13 Wal- tions of the protection of the liberty lace 335, Field, J. : " It is a gen- of the person, and of the staying of eral principle of the highest im- a tendency to arbitrary exercise of portanee to the proper administra- power, urged with so much eloquence tion of justice that a judicial officer, by the learned and accomplished in exercising the authority vested counsel for the appellant in him, shall be free to act upon his Nor have we been disposed to out- own convictions, without apprehen- weigh those considerations, with sion of personal consequences to him- that other class which sets forth the self. Liability to answer to every need of judicial independence, and of one who might feel himself aggriev- its freedom from vexation on ac- ed by the action of the judge, would count of judicial action, and of the be inconsistent with the possession interest that the public has therein. of this freedom, and would destroy These are not antagonistic princi- the independence without which no ples; they are simply countervail- judiciary can be either respectable ing. As with all other rules which or useful Nor cap this ex- act in the affairs of men, prepon- emption of the judges be affected by derance may not be fondly given to the motives with which their judi- one to the disregard of the other ; cial acts are performed. The purity 290 THE LAW OF SURETYSHIP. Although the Court is in fact wholly without jurisdiction to hear a cause, if the Judge in good faith determines that he has jurisdiction, upon the question being presented to him as a plea in bar, his action is judicial and he can not be held in damages for the consequences. While the Court does not acquire jurisdiction by merely de- ciding that he has it, yet he has the power to pass on all the questions which are presented to him in the ease while it ij pending, and his decision, although erroneous, that he has juris- diction to proceed, is a judicial act which may be the subject of review. of their motives can not in this way be the subject of judicial inquiry. .... A distinction must be here observed between excess of jurisdic- tion and the clear absence of all jurisdiction over the subject-matter. Where there is clearly no jurisdic- tion over the subject-matter any au- thority exercised is a usurped au- thority, and for the exercise of such authority, when the want of juris- diction is known to the judge, no execuse is permissible." See also Ackerley vs. Parkinson, 3 Maule and Selwyn 411. Doepfner vs. The State, 36 Ind. 111. In this case the justice, acting in excess of his authority, directed a constable to be committed to jail for contempt. It was held that the sureties upon his bond were not liable. But see Piper vs. Pearson, 2 Gray 120. Even though the acts in excess of jurisdiction are shown to have been malicious or corrupt, the judge is not liable. Bradley vs. Fisher (ubi supra). In Fray vs. Blackburn, 3 Best & Sm. 576, one of the judges of the court was sued for a judicial act, and the plaintiff asked leave to amend by introducing an allegation of malice. In refusing the leave the Court said : " It is a. principle of our law that no action will lie against a judge of one of the su- perior courts for a, judicial act, though it is alleged to have been done maliciously and corruptly; therefore the proposed allegation would not make the declaration good. The public are deeply inter- ested in this rule, which, indeed, ex- ists for their benefit, and was estab- lished in order to secure the inde- pendence of the judges and prevent their being harassed by vexatious actions." 122 Austin vs. Vrooman, 128 N. Y. 229; 28 N. E. 477. In this case the lack of jurisdiction was as to the power of a magistrate to try the defendant upon a criminal charge and impose a penalty, he having jurisdiction of the subject-matter and of the person, but merely for the purpose of remanding. See also Woodward vs. Paine, 15 Johns. 492. Where the magistrate had no jurisdiction of the person or of the subject-matter, but erroneous- ly decided that he had jurisdiction to hear a cause, held, that the magis- trate was a trespasser, and that his OFFICIAL BONDS. 291 A noticeable tendency appears in the reported cases to apply a more strict rule of liability to inferior courts of limited juris- diction than to the superior courts of more extensive juris- diction. The substance of the reasoning in support of this ap- pears to be that a Court of limited jurisdiction should solve all questions of doubt against its power, and that such Court does not violate its duties in declining to exercise a questionable authority, but that where a general jurisdiction is conferred the presumption arises that it is to be exercised broadly and with greater liberty, and that it would be an evasion of duty for such Judge to decline to act merely because doubt was expressed as to his jurisdiction. The view which seems supported by stronger reasons is that the law should not protect one judicial officer and not another, and that there is no reason why a preference should be given the one who, from his higher position and superior learning, ought to be most free from error.^^' §169. Liability of judicial officers for ministerial acts. A ministerial duty is one in regard to which nothing is left to discretion and is a definite duty imposed by law.^" Judicial decision as to his jurisdiction, al- ability for their errors, while the lat- though made in good faith, did not ter must be severely punished for protect him. Wingate vs. Waite, 6 honest errors of judgment? I can M. & W. 739. find no reason in such a distinc- But see Grove vs. Van Duyn, 44 tion." N. J. L. 654. Thompson vs. JacksoH, 93 Iowa 123 Brooks vs. Mangan, 86 Mich. 376; 61 N. W. 1004; Calhoun vs. 576; 49 N. W. 633. " It is conceded Little, 106 Ga. 336; 32 S. E. 86; that circuit judges cannot be held Lund vs. Hennessey, 67 111. App. liable In a civil action for any judi- HI] ^^°Pl« ^^- ^''^''' ^^ "l" ^P?" eial determination, although sueh 121 State of Miss. vs. Johnson, 4 determination results in depriving Wall. 498. the citizen temporarily of his liber- Flournoy vs. Jeflfersonville, 17 +„ n- -i ■ J „ Ind. 169. A ministerial act may, ty. Circuit judges are usually men perhaps, be defined to be one which of experience and education m the a person performs in a given state law, while justices of the peace sel- of facts, in a prescribed manner, in dom have any legal education or obedience to the mandate of legal training. Upon what reason should authority without regard to, or the .,, ^ ^ 'C10UU ouuuiu exercise of, his own judgment upon the former be held exempt from li- the propriety of the act being done." 292 THK LAW OF SUKETTSHIP. officers are often charged with the performance of ministerial duties. The act is none the less ministerial because the judicial officer is first required to perform judicial functions in determining his duty, such as to satisfy himself that the facts exist upon •which his ministerial duty rests, or the exercise of his dis- cretion respecting the means of performing it. Such officer may be charged with the duty of mating ap- pointments in the public service ; the act of passing upon the fitness of a person appointed is judicial, but the appointment is ministerial.^^^ It has been held that the duty of granting a writ of Habeas Corpus is ministerial.^"" Where ministerial duties axe east upon judicial officers, and such duty is violated, the officer is civilly responsible for the damages resulting from his misconduct. The issuing of an order of arrest by a Justice of the Peace, is considered a ministerial duty ; the Statute having made such act naandatory upon the filing of a proper affidavit, and the officer has been held liable on his bond for not issuing such writ in the manner provided by law, such as the failure to re- quire a proper undertaking before issuing the order.^"' So also a failure by a Justice of the Peace to issue execution when required by law is a breach of ministerial duty.^"* 12S Crane vs. Camp, 12 Conn. 464. the justice; lie must proceed In a i2« Nash vs. People, 36 N. Y. 607. specified manner. He acts in the 127 Place vs. Taylor, 22 0. S. 317, same capacity that he does in issu- Day, J. . " A justice of the peace ing an execution after judgment, acts in both a judicial and ministe- All these acts are such as, in the rial capacity. The manner of dis- Court of Common Pleas, are per- charging his judicial duties is left formed by the clerk of the court, to his own judgment; but, in gen- and are not dependent upon the ex- eral, the acts which he is required to ercise of judicial discretion ; but are perform in a. particular way, and such as a party may demand to as to which he has no discretion have done as of right. They are, about the manner of their perform- therefore, ministerial acts.'' ance, are of a ministerial character. 128 Gaylor vs. Hunt, 23 0. S. 255; In regard to the issuing of an order Fairchild vs. Keith, 29 0. S. 156. of arrest, everything to be done is Contra — Wertheimer vs. Howard, specifically defined by the statute. 30 Mo. 420. Nothing is left to the discretion 0/ OFFICIAL BONDS. 29H A Probate Judge has been held liable for issuing a marriage license to a minor contrary to law/^" A Judge acting within his jurisdiction can not be held liable for judicial errors, but he must obey the mandatory re- quirements of the law, and his failure to do so will create a liability upon his official bond/^" §170. liability of principal for acts of his deputy. A sheriff must answer for the official misconduct of his deputy, and his bond is liable for the acts of the deputy the same as if the things complained of were done by the principal, even though no such express condition appears in the bond. The act is that of the principal, although performed by the deputy..'" The default of the deputy must relate, however, to acts which the law requires him to perform in his official capacity. A tort or fraud committed by the deputy, while in the act of performing his duty, the duty itself being regularly performed, will not bind the principal, but the irregular, performance of a duty, such as a failure to pay over money by a Deputy Sheriff made on execution, will bind the Sheriff and his sureties. A misrepresentation by a deputy as to the title of property sold at public sale, is considered unofficial, and the principal is not responsible.'^^ The rule as to a Sheriff, Marshal, or Constable, whereby they are held for damages resulting from the irregularities of their deputies, is not extended to other classes of official sub- ordinates, who are themselves considered as public officers and liable directly to the party injured. 129 Wood vs. Farnell, 50 Ala. 546. i3i Crawford vs. Howard, 9 Ga. laoGrider vs. Tally, 77 Ala. 422; 314; Brayton vs. Town, 12 Iowa Stone vs. City of Augusta, 46 Me. 346; Thomas vs. Kinkead, 55 Ark. 127; Stone vs. Graves, 8 Mo. 148, 503; 18 S. W. 854; Brown vs. Weav- Pike vs. Megoun, 44 Mo. 491; Peoplfe er, 76 Miss. 7; 23 South. 388; Case vs. Bush, 40 Cal. 344 ; State vs. Car- vs. Hulsebush, 122 Ala. 212 ; 26 rick, 70 Md. 586; 17 Atl. 559; Mc- So. 155; Johnson vs. Williams, 111 Teer vs. Lebow, 85 Tenn. 121 ; 2 S. Ky. 289 ; 63 iS. W. 759 ; Deason W. 18; Wilson vs. Marsh, 34 Vt. vs. Gray, 189 Ala. 672; 66 So. 646. 352; Ferguson vs. Kinmmll, 9 Clark 1^2 Lewark vs. Carter, 117 Ind. & Fin. 251. 206; 20 N. E. 119. 294 THE LAW OF STJEETYSHIP. It is said that since the government is not itself responsible for the wrongs and misfeasance of public officers, to whom it has granted a franchise, that such officers in turn, who extend the franchise to a deputy, with the consent of the government, should not respond for the acts of negligence or wrong of such deputy where they are not themselves a party to it ; and further, on the grounds of public policy, it is urged that " competent persons could not be found to fill positions of the kind if they knew they would be held liable for all the torts and wrongs committed by a large body of subordinates in the discharge of duties, which it would be utterly impossible for the superior officer to discharge in person." ^^^ §171. Liability on bond of a notary public. A Notary Public violates his duty and renders his sureties liable upon his bond when he uses his ofBcial franchise for a wrongful purpose,^'* or for the negligent performance of a duty whereby another is injured.^'' The sureties upon a Notary's bond are liable, although the officer acts without any intent to violate the law or his duty.''" §172. Defenses in actions upon bonds of public officers. While the law does not favor forfeitures, and will not gen- erally entertain defenses which are merely technical, such as 133 Robertson vs. Sichel, 127 U. S. liable on his bond for tlie defaults 507; 8 S. Ot. 1286. In this case the of his deputy, although the latter is deputy collector of customs by his inot appointed by the postmaster, negligence caused a loss to an owner and holds his office by appoinitment of baggage arriving at the port of under the Civil Service rules of the New York, and the collector was government. Bryan vs. United sued for damages. It was held that States, 90 Fed. Rep. 473. he was not liable. is* Doran vs. Butler, 74 Mich. See also Conwell vs. Voorhees, 13 643; 42 N. W. 273; People vs. 0. 523; Scott Co. vs. Fluke, 34 Iowa Bartels, 138 111. 322; 27 N. E. 1091. 317- Foster vs Metts 55 Miss 77- . ^^^ Lescouzeve vs. Ducatel, 18 La. di/, i'oster vs. Metts, 5& Miss. 77, ^„ 47^. Curtiss vs. Colby, 39 Bowden vs. Derby, 97 Maine 536; Mich. 456; iScotten vs. Fegan, 62 55 Atl. 417; Barker vs. C. P. & St Iowa 236; 17 N. W. 491. L. Ey. Co., 243 111. 482 ; 90 N. ^^* Weintz vs. Kramer, 44 La. •P in^T Ann. 35; 10 South. 416; Heidt vs. Jli. lUO/. T\/ri««« on n-l nc. no Tt^^ flOT It is held that a postmaster is Minor, 89 Cal. 115; 26 Pac. 627. OFFICIAL BONDS. 295 where the Statute requires the bond to be filed by a certain date, or to be approved by a certain ofiicer/" and these re- quirements are not complied with, yet the equitable rules of construction in suretyship apply to official bonds, and although a, non-conformance of Statute does not work a forfeiture, where no injury results to the surety, the bond will nevertheless not be enforced, except according to its exact terms. " Sureties stand upon the words of the bond, and if the words will not make them liable, nothing can. There is no construction, no equity against sureties. If the bond can not have effect ac- cording to its exact words, the law does not authorize the court to give it effect in some other way, in order that it may pre- vail." "' A ministerial officer, such as a Sheriff or Constable, charged with the duty of executing the mandate of a Court, is fully pro- tected in executing a process issued to him by a Court of proper jurisdiction and authority, and may generally defend against the consequences of executing such process by shovTing that he acted wholly within its requirements. In order that the process of the Court shall suffice as a pro- tection to the officer serving it, there must be nothing on the face of it to indicate that it was without authority or jurisdic- tion."' If the process is fair upon its face, and does not discjlose any lack of authority or other irregularity in its issue, it has been 13' Ante Sec. 164, 166. Mathews vs. Densmore, 109 U. S. "8 State vs. Medary, 17 0. 565. 216; 3 S. Ct. 126; Baker vs. Shee- 130 Sheldon vs. Van Buskirk, 2 N. han, 29 Minn. 235 ; 12 N. W. 704 Y. 473. Cogburn vs. Spence, 15 Ala. 549 Hill vs. Haynes, 54 N. Y. 153. In Norcross vs. Nunan, 61 Cal. 640 this ease the execution was void, but Watson vs. Watson, 9 Conn. 140 nothing appeared on the writ, where- Chipstead vs. Porter, 63 Ga. 220 by the officer was in any way noti- State vs. McNally, 34 Me. 210 fied of the invalidity, and it was Lashus vs. Matthews, 75 Me. 446 held that the officer was protected Underwood vs. Robinson, 106 Mass. from the consequences of the wrong- 296 ; Hann vs. Lloyd, 50 N. J. L. 1 ful levy. 11 Atl. 346. 296 THE LAW OF SUKETYSHIP. held that the oflBcer is protected in the service, even though he knows that the issuing of the writ was irregular."" Where the jurisdiction or authority to issue the process is not apparent on the writ, the burden of showing the validity of the writ is upon the oiScer/''^ An ofHeer is protected by his writ, even though he knows that the person against whom the process was directed is privi- leged from its service.^*^ While it may be regarded as a set- tled rule that public officers are answerable in damages to any one who is specially injured by their omission to perform what the law requires of them, or by a careless or negligent per- formance of the duties of their office, — yet the law will excuse the non-performance of a prescribed duty, where the officer is prevented by circumstances beyond his control from exercising the functions of his office, as where no funds are available with which to carry on the work which belongs to his office, and no authority is vested in them to supply the funds. While a commissioner of public highways would be liable to a civil action for damages caused by his negligence in failing to keep in repair the roads and bridges under his control, such liability only attaches where he either has sufficient funds at his command to do the work, or has authority to raise the funds."^' An officer may refuse to act under the authority of an uncon- stitutional Statute, but the invalidity of the act can not be in- voked as a defense against his misconduct, where he treats the Statute as valid and assumes to act under it.^** 140 People va. Warren, 5 Hill (N. Y. 297; Hover vs. Barkhoof, 44 N, Y.) 440. Y. 113; Bennett vs. Whitney, 94 N. Confra— Grace vs. Mitchell, 31 Y. 302. Wis. 533; Leachman va. Dougherty, i** Olean vs. King, 116 N. Y. 355; 81 111. 324. 22 N. E. 559. The defense made hy 1*1 Chase vs. Ingalls, 97 Mass. the sureties in this ease was, that 524; Smith vs. Keniaton, 100 Mass. the tax levy was invalid, and that 172. the bond did not cover a default in 142 Smith vs. Jones, 76 Me. 138 ; accounting for the funds which the Gassier vs. Fales, 139 Mass. 461 ; 1 officer had no right to receive. Held N. E. 922. — " While a tax collector may de- 1*8 Garlinghouse vs. Jacobs, 29 N. cline to proceed in the collection ol OFFICIAL BONDS. 297 Defenises resulting from an alteration of an official bond or a change in the duties of the officer, or an extension of the tenure of the office, have been considered in the earlier part of this chapter. , 145 §173. Presumption that ofScial duty has been performed. . It would seem to be indispensable to the orderly adminis- tration of public affairs that the good faith of those charged with public duties should be presumed, and so far as the motive of the officer is concerned this presumption is conclusive in all cases where the officer acts within the letter of the law, or in other words, if the act would be valid if done in good faith, all persons will be estopped from questioning the motives.^*" It will also be presumed that the official act was valid and regular if it purports to be such on its face, and that the officer performed his duty as required by law. Where aji index book showed an entry of the judgment, but the judgment roll or record could not be found, the index was considered as evidence that the judgment had been duly rendered and recorded, since it would be presumed that the clerk would not have indexed the matter unless the record had been before him, the Court saying : " The presumption is that a tax illegally levied, as any person under which he was required to act may refuse to recognize any illegal was unconstitutional. Ignorance or authority, or to obey an unconstitu- mistake in judgment as to the valid- tional law, he may do so only for his ity of a law, does not excuse an offi- own protection. Having collected a cer for its disobedience. Clark vs. tax, he can not then question the Miller, 54 N. Y. 528. right of the proper authority to re- i^s Ante Sec. 169, 170, 171. ceive it, but must pay it over." For a discussion of the effect upon Brunswick vs. Snow, 73 Me. 177 State vs. Harney, 57 Miss. 863 Webb Co. vs. Gonzales, 69 Tex. 455 the liability of the sureties upon an official bond, where the legislature has extended the time within which 6 S. W. 781 ; Chandler vs. State, 1 the officer must make his settle- Lea (Tenn.) 296; Lincoln vs. Cha- ments, see Ante Sec. 87. pin,. 132 Mass. 470; Feigert vs. "o Taylor vs. Alexander, 6 0. State, 31 0. S. 432. 144 ; Webster vs. Washington Co., The officer is not relieved from 26 Minn. 220; 2 N. W. 697; Seaver performing his duty because he held vs. Pierce, 42 Vt. 325. an honest belief that the Statute 298 THE LAW OF SUEETYSHIP. no official person, acting imder oath of office, will do aught which it is against his official duty to do, or will omit to d« aught which his official duty requires should be done." ^" But the courts will not use the rule of presumption to supply fundamental jurisdictional defects, while there always arises a presumption that a public officer has performed his duty, there is no presumption as to his authority to do what he has undertaken. In accordance with this principle it was held that where school trustees omitted to give notice of an assessment of tax- able property, that such omission was jurisdictional and invali- dated the tax and rendered the trustees liable as trespassers in making a levy upon the property for the collection of such tax, and that there was no presumption of notice arising from the fact that the levy was made, and that the rule of presumption as to the performance of official duty did not apply to such jurisdictional defect.^*^ §174, Evidence against sureties on official bonds. A public officer by declaring his own default does not thereby preclude the Surety upon his Bond from showing the facts, such admission while binding upon the principal is not con- clusive against his Surety. Wo rule of evidence can be justified which permits a prin- cipal who has failed to keep faith with his Surety, and who i*T Mandeville vs. Reynolds, 68 N. intimately connected with the public Y. 534. peace, and the security of private United States Bank vs. Danridge, property, indulges its own presump- 12 Wheat. 69, Story, J. : " By the tions. It presumes that every man, general rules of evidence, presump- in his private and oflScial character, tions are continually made, in cases does his duty, until the contrary is of private persons, of acts of the proved." most solemn nature, when those acts Washington vs. Hosp, 43 Kan. are the natural result or necessary 324 ; 23 Pac. 564 ; Davany vs. Koon, accompaniment of other circum- 45 Miss. 71; Owen vs. Baker, 101 stances. In aid of this salutary Mo. 407; 14 S. W. 175. principle, the law itself, for the pur- "s Jewell vs. Van Steenhurgh, 58 pose of strengthening the infirmity of N. Y. 85 ; City of Albany vs. McNa- evidence, and upholding transactions mara. 117 N. Y. 168; 22 N. E. 931, OFFICIAL BONDS. 299 has violated his oath of office, to furnish by direct declaration, the proof wherebj the Surety is charged for his default. It is what the principal does and not what he may say he has done for which the Surety is liable, and unless these declara- tions are made at the time of the default they are of no higher character than mere hearsay, and the Surety is entitled to have the proof made by original evidence.'*" If, however, the declarations are made at the time of the transaction to which they relate, and are contemporaneous with the default, and illustrate its character, they then become a part of the res gestae and are admissible against the Surety.''" The entries whidi an officer maies in his books, shovdng balances against himself for which he does not account, are generally received as prima facie evidence in an action against his Surety, but the Surety is not estopped from showing that the statement of the books is incorrect. '°°'' Where an officer holds office two successive terms, with sepa- rate sureties each term, and at the close of his first term his books show an apparent balance on hand, but which in fact had been previously converted, the statement of the books was held not to be an admission whereby the sureties upon the second Bond would be conclusively bound.'°' mit the money to be then in his hands to the amount claimed, should "9 Hatch vs. Elkins, 65 N. Y. be conclusive upon the sureties. We 489; Stetson vs. Bank, 2 0. S. 167; do not think so. The accounts ren- Lewis vs. Lee Co., 73 Ala. 148. dered to the department of money i»» Blair vs. Perpetual Insurance received, properly authenticated, are 'Co., 10 Mo. 559; Society vs. Fitz- evidence, in the first instance, of Williams, 84 Mo. 406; Casky vs. the indebtedness of the officer Eaviland, 13 Ala. 314; Parker vs. against the sureties; but subject to State, 8 Blackf. (Ind.) 292; Dobbs explanation and contradiction. They vs. The Justices, 17 Ga. 024; Mc- are responsible for all the public Kim vs. Blake, 139 Mass. 593; 2 N. moneys which were in his hands at E. 157; Paxton vs. State, 59 Neb. the date of the bond, or that may 460; 81 N. W. 383. j-.ave come into them afterwards, and "oaPundmann vs. Schoenich, 144 ^ot properly accounted for; but not Mo. 149, 45 S. W. 1112. f^, ^„„,yg ^^ich the officer may -1 Bissell vs. Sa^ton, 66 N. Y. 55. choose falsely to admit in his hands, United States vs. Boyd, 5 How. in his account with the government. 29, Nelson, J.: "It has been contend- The sureties cannot be concluded bur ed, that the returns of the receiver to the treasury department after the execution of the bond, which ad- 300 THE LAW OF SUEETYSHIP. Admissions of the officer after the termination of his office or after his removal are not admissible against his sureties."* Where the principal and Surety are sued jointly, the admis- sion of the principal being competent against himself can not be excluded, and being admitted as against him, will generally be considered against the sureties. ^°' §175. Same subject — Judgment against principal as evidence against the surety. Three distinct views are maintained upon the question of the effect to be given to a judgment against the principal in estab- lishing a liability against the surety. (a) That such judgment is not admissible against the surety. (b) That a judgment against the principal is prima facie evidence against the surety. (c) That such judgment is conclusive against the surety. The first of these positions is supported by the somewhat plausible argument that an official bond is different in its terms from a bond of indemnity against a failure to perform a spe- a fabricated account of their princi- pal with his creditors; they may al- ways inquire into the reality and truth of the transactions existing between them." State vs. Rhoades, 6 Nov. 352 Mann vs. Yazoo City, 31 Miss. 574 Supervisors vs. Bristol, 99 N. Y 316; 1 N. E. 878; Hatch vs. Attle- borough, 97 Mass. 533; Lowry vs State, 64 Ind. 421; McShane vs, Howard Bank, 73 Md. 135; 20 Atl 776. Contra — Morley vs. Metamora, 78 111. 394; Chicago vs. Gage, 95 HI. 593; Longan vs. Taylor, 130 111. 412; 22 N. E. 745. But see Schureman vs. People, 55 111. App. 629. Where the books kept by a treasurer in a banking house of which he was sole proprietor were considered not conclusive upon the sureties. Sooy vs. State, 41 N. J. L. 394; Boone Co. vs. Jones, 54 Iowa 699; 2 N. W. 987; -7 N. W. 155. See also Bagot vs. State, 33 Ind. 262. Where it was held that the sheriff's return showing the collec- tion of money on execution was con- clusive against the sureties in an action against them for a failure of the officer to pay over the money. 152 Evans vs. State Bank, 13 Ala. 787 ; Comm. vs. Brassfield, 7 B. Mon. (Ky.) 447; City of St. Louis vs. Foster, 24 Mo. 141; Jenness vs. City of Black Hawk, ,2 Colo. 578; Lacoste vs. Bexar Co., 28 Tex. 420. 153 Magner vs. Knowles, 67 111. 325 ; Montgomery vs. Dillingham, 11 Miss. 647; Amherst Bank vs. Boot, 2 Met. 522; Parker vs. State, 8 Blackf. (Ind.) 292. But see Root vs. Caldwell, S4 Iowa 432 ; 6 N. W. 695. OFFICIAL BONDS. 301 cific act, such as a bond that a principal will pay a certain sum of money or satisfy a judgment. A finding against the prin- cipal on default of either of these conditions might well be considered prima facie evidence against the surety, or even conclusive, since the surety agreed that the principal would do the particular things of which he has been adjudged in default. But in official bonds, the sureties undertake that the princi- pal will perform his official duties, and it is necessary for a recovery against the surety to show what the duty in the par- ticular case was, and that such duty was not performed, and that, if a judgment to which the surety was not a party is ad- missible as prima facie evidence, the surety in meeting this, is placed in tlie position of being required to prove what the conduct of the principal was, and then justify it with further proof concerning the duty of the principal, placing upon the defendant a burden which should rest upon the plaintiff.'^* 154 A leading case supporting this view is, Pico vs. Webster, 14 Cal. 203, in which the Court says: " There can be no doubt, that where a surety undertakes for the princi- pal, that the principal shall do a, specific act, to be ascertained in a given way, as that he will pay a judgment, that the judgment is con- clusive against the surety; for the obligation is express that the princi- pal will do this thing, and the judg- ment is conclusive of the fact and extent of the obligation. As the surety in such case stipulates with- out regard to notice to him of the proceedings to obtain the judgment, his liability is, of course, independ- ent of any such fact. It is upon this ground that the liability of bail is fixed absolutely by the judg- ment against the principal. But this rule rests upon the terms of the contract. In the case of official bonds, the sureties undertake, in general terms, that the principal will perform his official duties. They do not agree to be absolutely bound by any judgment obtained against him for official misconduct, nor to pay every such judgment. They are only held for a breach of their own obligations. It is a general princi- ple, that no party can be so held without an opportunity to be heard In defense. This right is not di- vested by the fact, that another par- ty has defended on the same cause of action and been unsuccessful. As the sureties did not stipulate that they would abide by the judgment against the principal, or permit him to conduct the defense, and be them- selves responsible for the result of it, the fact that the principal has unsuccessfully defended, has no ef- fect on their rights. They have a right to contest with the plaintiff the question of their liability; for, to hold that they are concluded from this contestation by the suit against the sheriff, is to hold that they un- dertook for him that they would be responsible for any judgment 302 THE LAW OF SUBETTSHIP. It is also urged that a judgment against the principal should either be deemed of no effect against the surety, or else be taken as conclusive; that there is no consistent middle ground of holding such judgment as being prima facie evidence and subject to rebuttal proof rendering the judgment of no effect. ^°^ The record of a proceeding in amercement has also been held admissible against the sureties of the officer/^* §176. Same subject — View that judgment against the principal is prima facie evidence against the surety. The great preponderance of holding in this County is to the effect that, though a surety is not a party to a judgment against the principal, yet when a competent judicial tribunal, has de- termined the fact that there has been a breach of official duty, such fact should be considered as established against the surety, until he meets the issue by competent proof showing the con- trary: that two judgments finding the same fact should not be required, except where the surety specifically elects to try the matter anew. The rule that a judgment against the principal is prima facie evidence against the surety, gives to the surety the right to ad- duce proof in rebuttal of all points' on which the judgment against the principal depends. It is said by the Court in a leading case, " While the authori- ties are wide apart on the question it is evident that the decided weight is in favor of the doctrine that a judgment against the principal upon an official bond is prima facie evidence against the sureties. By this rule the right is reserved to such sureties against him, which might be ren- 317; People vs. Zingraf, 43 111. App. dered by accident, negligence, or er- 337; Eodini vs. Lytle, 17 Mont. 448; ror, instead of merely stipulating 43 N. W. 501; State vs. Leeds, 31 that they -would be responsible for N. J. L. 185. his official conduct." i=5 Lucas vs. The Governor, 6 Ala. Bailey vs. Butterfield, 14 Me. 112; 826. People vs. Russell, 25 Hun 524 ; Mc- i^e Governor vs. Montfort, 23 N. Dowell vs. Burwell, 4 Rand. (Va.) C. 155. OFFICIAL BONDS. 303 to interpose any defense they may have, and to be fully heard on the merits." "' §177. Same subject — View that judgment against the principal is conclusive against the surety. Where a judgment was entered against the principal for de- fault and thereafter a joint action was begun upon the bond against the principal and surety, it was held that the judgment 167 Beauehaine vs. McKinnon, 55 Minn. 318; 56 N. W. 1065. See also Moses vs. United States, 166 U. S. 571; 17 S. Ct. 682; Norris n. Mersereau, 74 Mich. 687; 42 N. W. 153; Dane vs. Gilmore, 51 Me. 544; Carr vs. Meade, 77 Va. 142;. State vs. Jennings, 14 0. S. 73; State vs. Cason, 11 S. C. 392; Heath vs. Shrempp, 22 La. Ann. 167; De Greiff vs. Wilson, 30 N. J. Eq. 435; Connor vs. Corson, 13 S. D. 550; 83 N. W. 588. Stephens vs. Shafer, 48 Wis. 54; 3 N. W 835, Taylor, J.: "The na- ture of the contract in official bonds is that of a bond of indemnity to those who may suffer damages by reason of the neglect, fraud or mis- conduct of the officer. The bond is made with the full knowledge and understanding that in many cases such damages must be ascertained and liquidated by an action against the officer for whose acts the sure- ties make themselves liable ; and the fair construction of the contract of the sureties is, that they will pay all damages so ascertained and liqui- dated in an action against their principal. This construction of the contract is most reasonable, and works no hardship against the sure- ties The principal is the one who ought to be at the expense of the litigation, and who ought to pay the damages. He is also the one who has the knowledge of the facts, and is certainly better pre- pared to litigate the matter than the sureties, who are not supposed to have any knowledge of the trans- action. Certainly the defense is likely to be properly made by the principal, who has full knowledge of the facts, and who is to suffer most severely in case of a decision adverse to him. In most cases of this kind, if the sureties were sued in the first instance, with their prin- cipal, the defense of the action would be made by such principal; and yet the judgment in such an action would necessarily be conclu- sive upon all. Holding the judgment . against the principal alone presump- tive evidence, as against the sure- ties, of the facts established by such judgment, can work no hardship so long as the right is reserved to them of. showing that the defense in such action was not made in good faith, was fraudulent, collusive, or suffered to be obtained through mis- take as to the facts." Charles vs. Hoskins, 14 Iowa 471. A judgment in amercement against a, sheriff was held prima facie evidence against the sureties in Fay vs. Edmiston-, 25 Kan. 439. See also Fire Association of Phil- adelphia vs. Ruby, 49 Neb. 584; 68 N. W. 939; Barker v. Wheeler, 60 Neb. 470; -83 N. W. 678. 304 THE LAW OF SURETYSHIP. against the principal was conclusive against the surety, and this was placed upon the ground that it ought in any event to be conclusive against the principal, and that of necessity it must also be binding against the surety in a joint action, for otherwise the whole controversy must be opened up even against the principal.^^' The doctrine that the judgment against the principal is con- clusive against the surety does not, however, rest wholly upon the cases where a joint action is brought, but is also applied by some courts where the contract is joint and several and the surety is sued alone.^°° One of the reasons urged in support of this view is that since a judgment in favor of a principal is conclusive in favor of the surety, that it should be conclusive when against the princi- pal. It is well settled that no recovery can be had against the surety upon a bond if a judgment has already been entered in favor of the prineipal,^^"" or if a judgment has been rendered against the principal for a smaller amount than the sum claimed in the action against the surety, the plaintiff will be 168 Tracy vs. Goodwin, 5 Allen settles conclusively against his sure- 409. "If no part of the judgment ties, as well as himself, not only the has been paid, the amount of it is right of the plaintiflF lo recdveir the amount due from him on the' against him, but the /amount of the bond. And the sureties have so damages. If the bond haA been made their bond that a joint judg- several as well as joint, there would ment must be rendered in this suit have been less embarrassment in against all the defendants. If they treating the evidence as' prima faoie, were permitted to open the matter, and permitting the sureties to offer and show that the plaintiff ought rebutting evidenca" not to have recovered his judgment, See aJso Dennle vs. Smith, 129 in whole or in part, their defense ^^ss. 143; Treasurer of the City of „ , i li u isj. j: J.I. Boston vs. Shapero, 217 Mass. 71. must enure to the benefit of the lesMasser ^'8. Strickland, 17 Serg. prmcipal as well as to theirs. We & R. 354; Evans vs. Coram., 8 Watts think it more in conformity with the (Pa.) 308; McMick'n vs. Coram., true intent and spirit of their obli- 58 Pa. 214; Cony vs. Barrows, 46 ™+-„ i I, ij j-v, i. -J. • Me. 497; Thomas vs. Markmann, 43 gation to hold that it is a guaran- ^^^ 333 . 62 N. W. 206; Charaber- ty to the plaintiff for such amount lain vs. Godfrey, 36 Vt. 380; iSlat- as he has legally established to be tery vs. Schapero, 217 Mass. 71; due to himself from the constable; 104 N. E. 440; Ann. Cases 1915D, and that in the absence of fraud or ico„cjj. " /-i n loi t „ „ . ,, . ">i X lB9(i Stevens vs. Carroll, 131 Iowa collusion, the judgment agkinst hrm nQ- 105 N. W. 653. OFFICIAL BONDS. 305 limited in his recovery to the amount of the judgment against the principal."" Where the judgment is first obtained against the surety, and afterwards in a separate action against the principal, the judg- ment is in favor of the defendant. The surety may be exon- erated by a perpetual injunction against the collection of the judgment.^"' §178. Limitations upon actions against sureties on official bonds. Statutory provisions exist in all the States limiting the time within which an action can be brought upon an official bond, and as in the case of bonds, to secure private obligations, the statutes do not usually undertake to define when the cause of action accrues.^"^ ' The courts have experienced some difficulty in fixing a rule as to the time the statute begins to run, and there is much di- versity of holding in this respect. In a number of the States the courts have not adhered to the construction first announced. The prevailing rule seems to be that the statute begins to run from the time of demand upon the officer for settlement, although a person having a claim against an officer for default will be required to assert his rights by making a demand within a reasonable time, and where no demand is made the law generally presumes a demand after a lapse of time equal to the statutory limitations. Thus where a sheriff converted money of the plaintiff for his own use in 1855, and no demand was made until 1867 and the action brought in 1868, it was held that a demand would be presumed in 1865, ten years being the statutory limitation, 160 United States vs. AUsbury, 4 against the sureties could not ex- Wall. 186. In this ease a paymaster eeed that which had been ascer- was sued upon an alleged shortage tained to-be due from the principal of about $20,000.00, and judgment in the former action, was rendered against him for $10,- See also Brown vs. Bradford, 30 000.00. Ga. 927. In a subsequent action against the lei Ames vs. Maclay, 14 Iowa £81. nuieties it was held that the liability i62 Ante See. 159. 306 THE LAW OF SUHETYSHIP. and the action could thereafter he brought at any time before 1875.^=* i63Keithler vs. Foster, 22 0. S. 27. The presumption of demand at the expiration of the statutory period of limitation is approved in Thrall vs. Mead, 40 Vt. 540. Codman vs. Rogers, 10 Pick. 112. The statute of limitations begins to run on an official or surety bond from the breach thereof, and not from its date. McGovern vs. Rectanus, 139 Ky. 365; 105 S. W. 965; 14 [L. R. A. (N.lS.) 380; Mc- Kim vs. Glover, 161 Mass. 418; 37 N. E. 443; U. S. F. & G. Co. vs. Citizens' State Bank, 36 N. D. 16; 161 N. W. 562; L. R. A. 1918E, 326; Williams vs. Flippin, 68 Miss. 680; 10 So. 52. It is said that limitation does not begin to run on the bond of a public officer until the term of his oflBce for vrhich such bond was given has expired, even if the wrongful conversion took place some time before. People vs. Van Ness, 79 Cal. 84; 21 Pac. 554. CHAPTER VIL JUDICIAL BONDS. Sec. 179. Soiretyship in the Application of Legal Remedies. See! 180. Bonds for Stay of Execution or Appeal. Sec. 181. Statutory Requirements as to Appeal or Stay Bonds. Sec. 182. Irregularities or Defects whereby Bonds are Invalidated. Sec. 183. Immaterial Defects in the Contract. Sec. 184. Failure to Perfect the Appeal. Sec. 185. Conditions upon which Appeal or Stay Bonds become Payable. Sec. 186. Same Subject — Affirmance by failure to Prosecute, Appeal. Sec. 187. As to when Action may be brought upon Bond for Appeal. Bee. 188. Measure of Damages in an Action upon an Appeal or Stay Bond. Sec. 180. 'Successive Appeal Bonds. Sec. 190. Defenses in Actions upon Appeal Bonds — Estoppel. Sec. 191. Appeal from a Justice Court. Sec. 192. Bonds to Procure Injunction. Sec. 193. When Action for Damages upon an Injunction Bond Accrues. Sec. 194. Construction of Bonds to Procure Injunction. Sec. 195. Defenses of Sureties upon Injunction Bonds. Sec. 196. Measure of Damages for Breach of Injunction Bond. Sec. 197. Same Subject — ^Defendant's Expenses in Procuring a Dissolu- tion of Injunction. Sec. 198. Attachment Bonds. Sec. 199. Attachment Bomds not Fbrfeited for Irregularities of Exeoutiom or Defects in Form. Sec. 200. Whether Damages for Malicious Prosecution axe Recoverable upon Bond to Procure Attachment. ISec. 201. Forthcoming or Redelivery Bonds. Sec. 202. Bonds to Discharge Attachment. Sec. 203. When Action Accrues upon Bonds in Attachment. Sec. 204. Good Faith of the PlaintiiT, or Probable Cause for Attachment not a Defense in Actions upon Bonds. Sec. 205. Sureties Estopped from Questioning the Regularity of the Pro- ceedings out of which their Liability Arises. Exoneration of Sureties in Attachment Proceedings. Attachment Bonds are Available in any Court to which the Case is taken on Appeal. Measure of Damages in Actions upon Attachment Bonds. Replevin Bonds. Conditions of Bonds in Replevin. Bonds in Replevin which are Void. What Constitutes a Breach of a Replevin Bond. 307 Sec. 206. Sec. 207. Sec. 208. Sec. 209. Sec. 210. Sec. 211. Sso. 212. Rw 213. See. 214. Sec. 215. Sec. 21i6. Sec. 2il7. Sec. 218. Sec. 219. Sec 220. 308 THE LAW OF SURETYSHIP. Sureties upon Replevin Bonds are Concluded by the Final Order in the Replevin Action. Measure of Damages in Action upon Replevin Bonds. Defenses in Action on Replevin Bonds. Bonds given in the Course of the Administration of Estates of Deceased Persons. Duties for which Executors and Administrators are Chargeable on their Bonds. The Scope of the Adimiirastration Bond Covers all Assets and Equities of the Estate. Successive Administration Bonds are Cumulative. As to whether Judgment or Order of Court against the Prin- cipal is Necessary to a Cause of Action on the Administration Bonjd. Sec. 221. The Sureties upon the Bond of an Administration are Concluded by Judgment against the Principal. Sec. 222. Defenses to Action upon Administration Bonds. Sec. 223. Who may Maintain Action on Administration Bonds. Sec. 224. Bonds of Guardians — Scope of Liability. iSec. 225. Settlement of Guardian's Accounts — Release of Sureties on the Bond. Sec. 226. An Adjudiioation Against the Guardian is Conclusive agaon^ the Sureties. Sec. 227. Bonds given in the Course oi Insolvency Proceedings. Sec. 228. Bail Bonds. Sec. 229. Conditions in Bail Bonds — Time of Appearance. Sec. 230. Slame Subject — ^Place of Appearance. Sec. 231. Defenses against Bail Bonds. Sec. 232. Discharge or Exoneration of Bail. §179. Suretyship in the application of legal remedies. It is somewhat of an anomaly for the law to require a party to a legal action to indemnify his opponent against damages resulting from such proceedings. The law itself having authorized the bringing of an action and made provision for the review in a higher court of the questions made at the trial, any limitation upon the use of the courts to effectuate these privileges is inconsistent with the theory of abstract right, for the maintenance of which courts are created. There are, however, numerous provisions of the law which limit the bringing of an action, or the review of a judgment, except upon the condition that the plaintiff indemnifies the JUDICIAL BONDS. 309 otber party against the loss which may result to him as a nec- essary incident to the proceeding. The anomaly is more marked in the matter of the enforce- ment of such provisional remedies as attachment or injunction, •where the damages, if any, flow directly from an order or judg- ment of the court, and where the party is required to give bond to secure the payment of the damages that may arise in case the order or judgment of the court should turn out to be wrongJ So also, although the Constitution creates courts and opens their doors for all citizens to invoke their decrees, yet in many cases the statutes require a party to enter into an undertaking in suretyship before starting his action, frequently requiring him to secure the costs of litigation, even though he 'finally pre- vails against his opponent, in case the latter, although adjudged to pay costs, is insolvent. These requirements of the law have been engrafted upon our procedure from time to time as the necessity has developed. The liberal extension of the right to invoke legal remedies has made imperative some check against the abuse of the privilege; without requirements to secure the costs of an action, vexatious litigation, actions begun in bad faith and without even a prob- able cause, have resulted, which impose burdens on the courts and the officers who serve their processes, which were not con- templated by the Constitution. The common law made no provision for bonds in stay of exe- cution, and the filing of a writ of error in the Reviewing Court of itself operated as a stay or supersedeas of execution from the time of its allowance or recognition by the court to which it was directed. In England a writ of supersedeas was issued from the Re- viewing Court to the Inferior Court, stopping all further pro- ceedings in the latter court, and vnthout any security being given to the defendant in error. But these proceedings in error came to be sued out merely for the purpose of delay, and Acts of Parliament were passed requiring security in certain 310 THE LAW OF STJEETYSHIP. cases before the writ should operate as a supersedeas/ Later the statute extended the provision to all cases.'' The Federal Judiciary Act of 1789 provides that a party prosecuting error and an. appeal shallgive good and sufficient security, that the plaintiff in error, or the appellant, shall pros- ecute his writ or appeal to effect, and if he fail to make his plea good " shall answer all damages and costs." ' The language of this statute as well as the controlling prece- dents in England from which the procedure was adopted, seem to indicate that the bond provided for was merely to secure the costs in the appellate court and the damages incident to delay, with no provision for securing the judgment. The United States Supreme Court, however, construed the " damages " to include the payment of the original decree,* without any specific provision in the statute relating to the pay- ment of the judgment as is found in nearly all the State stat- utes.° 1 Statute of 3 James I., e. 8. This statute required security only in cases of proceedings to reverse judg- ments upon a bond, or contract, or a debt for rent. 2 13 Car. II., c. 2; 16 and 17 Car. II., u. 8. 3 See. 1000, U. S. Statutes. * Catlett vs. Brodie, 9 Wheat. 553, , Story, J.: "The judiciary act of 1 1789, eh. 20, s. 22, requires every judge or justice, signing a citation on a writ of error, to take good and sufficient security that the plaintiff in error ' shall prosecute his vprit to effect, and answer all damages and costs if he fails to make his plea good.' A writ of error lodged in the clerk's office within ten days after the rendition of judgment, operates as a supersedeas of execu- tion ; and the question arises, wheth- er, in cases where it operates as a supersedeas, the security taken by the judge or justice ought to ba sufficient to secure the whole amount of the judgment. It has been sup- posed, at the argument, that the act meant only to provide for such damages and costs as the Court should adjudge for the delay. But our opinion is, that this is not the true interpretation of the language. The word ' damages ' is here used, not as descriptive of the nature of the claim upon which the original judgment is founded, but as descrip- tive of the indemnitywhich the de- fendant is entitled to, if the judg- ment is affirmed. Whatever losses he may sustain by the judgment's not being satisfied and paid after the affirmance, these are the dam- ages which he has sustained, and for which the bond ought to give good and sufficient security." Kountze vs. Omaha Hotel Co., 107 U. S. 378. 5 The statute in Ohio provides that no proceedings to reverse, va- cate, or modify a judgment or an order rendered in an inferior court. JUDICIAL BONDS. 311 Again it was found that hasty orders of injunction resulted in damages to the defendant for which he was unable to get re- dress, even from the plaintiff himself, as the latter had entered into no contractual relation with the defendant to respond in damages, and the eases in which the courts were misled by false or mistaken allegations in the pleadings, imposed special bur- dens on the defendant, which induced the Courts of Equity, of their own motion, and without any directing statute, to re^ quire the applicant for these extraordinary remedies to furnish an undertaking for the protection of the defendant, and to en- able the court to punish the plaintiff in case his allegations were unsupported by proof/ This form of judicial bond, at first resting in lie discretion of the court, became later the subject of rules of chancery such as that laid, down in general orders by the Chancellor of New shall operate to stay execution, un- less the clerk of the court in which such judgment or order is made take a written undertaking, with suffi- cient surety conditioned to pay the judgment if it be affirmed in whole or in part. R. S. O., Sec. 6718. Or if the proceeding is an appeal whereby the case is retried on new evidence in the Appellate Court the statute provides that the bond shall be conditioned that the appellant shall abide and perform the order and judgment of the Appellate Court, and shall pay all money, costs, and damages which may be required of or awarded against him by such Court. R. S. 0., Sec. 5231. "Marquis of Downshire vs. Lady Sandys, 6 Ves. Jr. 107; Wilkins vs. Aikin, 17 Ves. Jr. 422. No act of Congress has ever been passed authorizing the Federal Courts of the United States to re- quire an undertaking from an appli- cant for an injunction, and the re- quirement of an injunction bond in that court rests in the discretion of the judge, and the matter is govern- ed by the principles and usages of equity, and the court may not en'/ grant the injunction without a bond, but having required a bond, may nullify it by its decree, where it appears to the Court that the bond should not have been demanded. Russell vs. Farley, 105 U. S. 441, Bradley, J. : " Since the discretion of imposing terms upon a party, as a condition of granting or withhold- ing an injunction, is an inherent power of the Court, exercised for the purpose of effecting justice between the parties, it would seem to follow that, in the absence of an imperative statute to the contrary, the courts should have the power to mitigate the terms imposed, or to relieve from them altogether, whenever in the course of the proceedings it ap- pears that it would be inequitable or oppressive to continue them. Besides, the power to impose a condition im- plies the power to relieve from it." 312 THE LAW OF StTKETYSHIP. York in 1830, which provided that where no special provision was made by law as to security, the Viee-Chanoellor, who al- lowed the injunction, should take from the complainant a bond to the party enjoined, either vTith or without sureties, in such sum as might be deemed sufficient, conditioned to pay the dam- ages which the defendant might sustain by reason of the injunc- tion, if the court should decide that the complainant was not entitled to the relief/ This rule was subsequently carried into the New York Code of Procedure and has in general been followed in the codes and systems of other States, except that the discretion as to accept- ing bonds without sureties has for the most part been removed. §180. Bonds for stay of execution or appeal. In most jurisdictions a review of the higher court of the rec- ord made by the lower court is denominated an appeal, and a bond to stay execution or supersedeas is termed also an appeal bond, and while the Appellate Court passes upon the facts as well as the law, it is confined to the facts adduced in the lower court.* The term " appeal bond " in some courts of general jurisdic- tion is accordingly, used interchangeably with supersedeas. In some courts of limited jurisdiction, such as a magistrate's court, an appeal bond generally vacates the judgment, and provides a new trial in the Appellate Court' ' 1 Hoflf. Ch. Pr. 80. appeal and supersedeas bonds are Cayuga Bridge Co. vs. Magee, 2 not interchangeable terms. Mason Paige 116-22. vs. Alexander, 44 0. S. 328 ; 7 H. E. s Sharon vs. Hill, 26 Fed. Rep. 435. 337. 9 Some confusion is likely to arise In Ohio an appeal is distinct from in failing to discriminate between a proceeding in error, and an ap- an appeal — ^which is a retrial, where peal vacates the judgment or decree, the case goes up from a court of and the case is retried in the Appel- limited jurisdiction, and an appeal late Court on the same or substi- which is a proceeding in error upon tuted pleadings, and upon such evi- the record made in a, court of gen- dence as may be offered, and the eral jurisdiction. The undertaking trial is in all respects the same as given in the former is a necessary if it had not been carried on in the step in perfecting the appeal, and is lower court. Under this practice, governed usually by strict statu- JUDICIAL BONDS. 313 An appeal, whether in the nature of a writ of error, or a re- trial, is usually conferred by Statute as a matter of right, and the remedy, however groundless, except in certain special pro- ceedings, can not be denied.^" tory conditions as to time of filing, and the amount of penalty, whereas an appeal which is in the nature of a writ of error, does not require an undertaking as a condition of a hearing in the reviewing court, the undertaking being merely to stay execution, and wholly disconnected from the right to prosecute error, the amount of the bond and sometimes eveh the requirement of any bond being discretionary in the trial court. In its origin the proceeding in appeal was a technical practice, bor- rowed by equity from the civil law, by which the whole ease was tried de novo upon new evidence, and without any reference to the conclu- sions reached in the inferior court, and was confined to causes in equity, ecclesiastical, and admiralty juris- dictions. But the modern statutory appeal, with the exceptions hereto- fore noted, differs only from the common law writ of error, in that the latter submits nothing for re- examination in the reviewing court but the law, while an appeal reviews both the law and the facts. State vs. Doane, 36 Neb. 707. There is, however, no uniformity in the statutory appeal provided for in the several States. In North Carolina only matters of law are reviewed upon appeal, except where the action was originally cognizable in equity; in which case findings of fact are reviewable. Baker vs. Bel- vin, 122 N. C. 190; 30 S. E. 337. The same effect is given appeal in Connecticut. White vs. Howd, 66 Conn. 264. While in Nebraska, the higher court re-examines on a.ppeal the whole case, both in the law and facts. Neb. L. & T. Co. vs. Lincoln, etc., R. K. Co., 53 Neb. 246; 731 N. W. 546. See also Ex parte Henderson, 6 Fla. 279; iSchirott vs. Philippi, 3 Oregon 484. The use of the term appeal in a double sense, sometimes meaning a retrial, and again a review, some- times embracing a review of both the law aud the facts, and again a review only of the law questions, is further complicated by the terms by which certain reviewing courts axe designated. The court of last re- sort in Kentucky, Maryland, and New York is called "Court of Ap- peals." In Virginia, the "Supreme Court of Appeals." Intermediate courts in Illinois, Indiana and Tex- as, are termed "Appellate Courts." and the intermediate Federal Court "The United States Circuit Court of Appeals," and yet each of these courts entertain writs of error and statutory appeal, and are not in a technical sense courts of appeal ex- clusively as their names would in- dicate. 10 McCreary vs. Rogers, 35 Ark. 298; Ricketson vs. Compton, 23 Cal. 636; State vs. Judge of iSuperior Dist. Ct., 28 La. Ann. 547; People vs. Knickerbocker, 114 111. 539; 2 N. E. 507; Ridgely vs. Bennett, 81 Tenn. 206. The question of liability muati be determined by the terms of the bond itself. Whether it is a statutory bond or a common-law bond or neither, is immaterial. A court has the inherent power to order a stay of its mandate, and in aid of such power has also the inherent power to require such bond as will en- force obedience to its order and pro- tect the interest of the parties. The surety, however, cannot be held liable beyond the terms of the bond. Southwestern Surety Ins. Co. vs. U. 18. P. & G. Co., 75 Okla. 232; 182 Pae. 522. 314 THE LAW OP SURETYSHIP. §181. Statutory requirements as to appeal or stay bonds. The statutes requiring bonds in appeal generally limit the time within which such bonds must be filed, and the Appellate Court acquires no jurisdiction in appeal, except upon a strict compliance with the Statute in this respect.^^ Although it is sometimes held that a substantial compliance with the law is sufScient.^^ The provisions of Statute that bonds shall be approved by a designated officer are imperative, and the appeal may be dis- missed for a non-compliance with such Statute,^^ although the act of the officer in refusing to approve the bond may be reviewed.^* The appeal or stay bond must be conditioned according to law, otherwise the appeal can not be entertained. Where a Statute requires an appeal bond to recite that the ' ' appeal shall be prosecuted with effect," and this condition is omitted, the appeal will be dismissed on motion,^' but the use of language which means substantially the same as the words employed ia the Statute will be a sufficient compliance with the Statute.^* 11 Mueller vs. Kelley, 8 Col. App. 527; 47 Pac. 72; KiUian vs. Clark, 111 U. S. 784; 4 S. Ct. 686; Worm, ley vs. Wormley, 96 111. 129 ; Lengle vs. Smith, 48 Mo. 276; Canfield vs. City of Erie, 21 Mich. 160; Smith- wick vs. Kelly, 79 Tex. 564; 15 S. W. 486; Pace vs. Ficklin, 76 Va. 292; Holcomb vs. Sawyer, 51 Cal. 417. 12 Perkins vs. Shadbolt, 44 Wis. 574. In this case the bond was not approved by the Court until a day after the aspiration of the statutory limit, and it was considered a sub- stantial compliance with the law. In North Carolina the Statute gives the Court discretion to extend the statutory limit where it ap- pears that the delay will not preju- dice the appellee. Harrison vs. HoflF, 102 N. C. 25; 8 S. E. 88'7. 13 Ingram vs. Greenwade, 12 Ky. L. Eep. 942; Keen vs. Wliittington, 40 Md. 489; Gross vs. Bouton, 9 Daly (N. Y.) 25; Fogel vs. Dus- sauit, .141 Mass. 154; 7 N. E. 17; Stebbins vs. Niles, 21 Miss. 307; Travis vs. Travis, 48 Hun 343; 1 N. Y. S. 357. A failure to approve the bond ac" cording to law will not discharge the sureties, where the bond is acted upon, the provision of approval be- ing considered as for the benefit of the obligee, and his failure to object is deemed a waiver. Irwin vs. Crook, 17 Col. 16; 28 Pac. 549; Ryndak vs. Seawell, 102 Pac. 125; 23 Okl. 759. 1* Marsh vs. Cohen, 68 N. C. 283 ; Earle vs. Earle, 49 N. Y. Super. Ct. 57. 15 Swan vs. Hill, 155 U. S. 394; 15 S. Ct. 158. In Missouri the Statute requires the bond in appeal to recite a con- dition binding the obligor to comply with the decision of "any Appellate Court," and it was held insufficient to state in the bond that the appel- lant would comply with the decision of "The St. Louis iCourt of Ap- peals." American Brewing Co. vs. Talbot, 125 Mo. 388; 28 S. W. 585. See also Drinkwine vs. City of Eau Olaire, 83 Wis. 428; 53 N. W. 673. 18 Riley vs. Mitchell, 38 Minn. 9; 35 N. w. 472. The bond in thia ■case recited that the appellant would prosecute her appeal "with due dili- gence to a final determination," and it was held to be a compliance with the statutory condition to "preset- cute his appeal with effect." See also Anderson vs. Meeker Ca Com'rs, 46 Minn. 237; 48 N. W. JUDICIAL BONDS. 315 Where an appeal bond is not in tlie express terms of the Statute, it may be valid as a common law obligation volun- tarily entered into by the parties.^"" A statutory requirement for the justification of sureties must be complied with, or otherwise the appeal is subject to dis- missal.^' If the appeal is not dismissed, the sureties upon the bond will not be exonerated, because of a non-compliance with the Statute as to justification. In New York the code provides that "an undertaking upon an appeal shall be of no effect unless it be accompanied by an affidavit of the sureties that they are each worth double the sum specified therein. ' ' And it was held that although a fail- ure to comply with the requirement of the Statute would make the appeal irregular and would be a ground for dismissal, yet if the appeal was not dismissed, the irregularity would be no defense to the sureties.^^ But where the sureties to an undertaking, given to stay pro- ceedings on appeal, are excepted to, and they fail or refuse to justify, and justification is not waived by the respondent, the sureties are discharged from liability ; the effect of the failure to justify is, by Statute, "the same as if the undertaking had not been given. ' ' ^^'^ It is held that an appeal will not be dismissed because of a failure of the sureties to justify where it is shown that the security is in fact sufficient.^' While a bond, if given for a smaller sum than required by Statute or the order of the Court is irregular, and constitutes ground for dismissal of the appeal,^" yet it is not such a defect as will operate as a discharge of the surety if the appeal is prosecuted without objeetion.^^ 1022; Gay vs. Parpart, 101 U. S. i? Harshaw vs. McDowell, 89 N". 391; Oarmichael vs. HoUoway, 9 C. 181; Pencinse v.s. Burton, 9 Ore- Ind. 5W; Robinson vs. Brinson, 20 gon 178. Tex. 438; Kasson vs. Brocker, 47 is Hill vs. Burke, 62 X. Y. 111. Wis. 7«; IN". W. 418. See also Murdoek vs. Brooks, 38 ma First State Bank v. Stevens Cal. .596; Moffat vs. Greenwalt, 90 Land Co., 119 Minn. 209; 137 N. W. Cal. 368; 27 Pao. 296; Eyndak vs. 1101; Pray v. Wasdell, 146 Mass. Seawell, 102 Pac. 125; 23 Ore. 75^; 324; 16 N. E. 266; Meserve v. Nichols & Shepard Go. vs. Horsted, Clark, 115 III. .580; 4 N. E. 770; 130 N. W. 776, 27 S. D. 262. Decker v. Decker, 63 So. 24; 9 Ala. isa Manning vs. Gould, 90 N. Y. App. 241. 476; Eiddle vs. MacFad'den, 112 It has been held that the consid- N. Y. S. 498. eration of such common law under- i^ St. Louis, L. & D. Ey. Co. vs. taking is the perfection of the ap- Wilder, 17 Kan. 239. peal and therefore failure to do so 20 Beaird vs. Russ, 32 La. Ann. renders the bond unenforceable. 304; Scott vs. Milton, 26 Fla. 52; Pace Grocery Co. vs. Siavage, 114 7 South. 32. S. W. 866. =1 Anderson vs. Rhea, 7 Ala. 104. 316 THE LAW OF SUKETYSHIP. The requirement of a Statute for a bond in appeal to be executed in double the amount of the decree and costs, will not be construed to invalidate the appeal where the penalty named exceeds the statutory requirement.^^ Statutes requiring the residence of the surety to be inserted in the bond, will, if not complied with, justify the approving officer in rejecting the bond, or possibly be ground of dismissal of the appeal, but the omission will not discharge the sureties.^' Appeal or stay bonds are not invalidated because the persons signing as sureties are prohibited by law from signing in that Dore vs. Covey, 13 Cal. 502. In this case the Court said that the statutory provisions as to the amount of the penalty are for the benefit of the obligee, and his failure to object must be considered a waiv- er. " Just as if the statute declared that no judgment should be ren- dered without service of process; but the defendant might waive the process or service. This waiver was made by the plaintiff below. He considered the appeal as regularly made, made no motion to dismiss, issued no execution, and suffered the undertaking to have the full effect of a regularly executed instrument." Cain vs. Harden, 1 Oregon 360; Jenkins vs. Skillern, 5 Ycrg. ( Tenn. ) 288; Landa vs. Heermann, 85 Tex. 1; 19 S. W. 885; Sears vs. Seattle Consol. St. Ry. Co., 7 Wash. 286; 34 Pac. 918. 22Bentley vs. Dorcas, 11 0. S. 398, Gholson, J. : " An objection is made to the form of the appeal bond, that the penalty is not pre- cisely double the amount of the judgment or decree In an early case, it was said as to such a bond, that, ' There is no case where a bond fairly and regularly executed, and comprising substan- tially all the requisites of the stat- ute, has been adjudged void because it departed, in some one or more particulars, from the exact words of the statute authorizing it to be taken. It has been the uniform ob- ject of our courts, to support bonds executed under the provisions of the law, where, by a reasonable inter- pretation, such bonds can be made to meet the intention for which they were required and taken. " ' Where a party has had all the advantages of making the bond, the court can not aid him to avoid his obligations, by adopting strained and rigid maxims of construction." Gardiner vs. Woodyear, 1 Ohio 170, 177.' .... Assuming the costs to be correctly stated, the penalty of the bond exceeds double the amount of the decree and costs by a few cents. To hold that this error in ascertaining the penalty rendered the bond invalid, would, in view of the principle above stated, be un- reasonable." See also Smith vs. Whitaker, 11 111. 417. Contra — Johnson vs. Goldsbor- ough, 1 Harr. & J. (Md.) 499. 23 Dore vs. Covey, 13 Cal. 502; Murdock vs. Brooks, 36 Cal. 596; Van Deusen vs. Hayward, 17 Wend. 67. JUDICIAL BONDS. 317 capacity. Kules of Court, or Statutes in many States, prohibit attorneys and non-residents from being accepted as sureties on judicial bonds. The approval of such prohibited parties as sureties is groimd for dismissal of the appeal,^* but the sureties will be held if the appeal is prosecuted.^" Where the Statute provides that the Court shall fix the amount of the penalty in the bond, and the parties themselves fix the amount and the bond is executed accordingly, the statu- tory requirements will be deemed waived.^'' But if the bond recites that the amount of the penalty was fixed by the Court, all parties in interest will be estopped from showing otherwise.^^ Where the Statute requires more than one surety, a bond not conforming to this provision will be valid and binding upon the sole surety, if the purpose for which the bond was executed has been accomplished.^* §182. Irregularities or defects whereby bonds are invalidated. The distinction must be noted between such informalities in the Bond as merely give to the obligee the light to have the appeal dismissed, and those defects which invalidate the Bond itself. The illustrations cited in the preceding section show that while a non-compliance with statutory requirements will be ground for the dismissal of the appeal, the bond itself is not on this account invalidated, in case the appeal is prosecuted. Since the obligor would be clearly estopped from pleading a non-compliance to statute, he having had all the benefit of an appeal. If, however, the undertaking lacks the formality of a valid 24 Sedgwick vs. Dawkins, 15 Fla. D. 115; 82 N. W. 507; Braithwaite 572; Schuek vs. Hagar, 24 Minn. vs. Jordan, 5 N. D. 196; 65 N. W. 339 ; Ulrieh vs. Farrington Mfg. Co., 701. 69 Wis. 213; 34 N. W. 89. 2' Ogden vs. Davies, 116 Cal. 32; 25McKellar vs. Peek, 39 Tex. 381; 47 Pao. 772? Ullery vs. Kokott, 61 Pae. Rep. 2s Cochran vs. Wood, 29 N. C. ISO; 15 Col. Apip. 138; 61 Pac. 189. 215; Allen vs. Kellam, 94 Pa. 253; =0 Johnson vs. Noonan, 16 Wis. B. & 0. Ry. Co. vs. Vanderwarker, 687; Coughran vs. Sundbc.ck, 13 S. 19 W. Va. 265. 318 THE LAW OF SUEETYSHIP. contract it can not be enforced, even though the appellant by reason of the acceptance of such bond has had all the benefit of the stay of execution provided for by law. Where the bond contains no defeasance clause avoiding liabil- ity in case the appellant performs the order of the court, it ia held that the undertaking is invalidated; such instrument is not a bond and can not be enforced.^" So also where the name of the judgment creditor was omitted^ and the name of another appellee was inserted, the latter being a stranger to the record, no recovery was had/" A bond will be void for want of consideration where there is no requirement of the law for an appeal bond. Thus where an administrator is exempted from giving a bond in appeal by reason of having already given aji adequate bond as adminis- trator, a bond executed notvdthstanding the exemption will be void for want of consideration.^^ Also where there is no necessity for a supersedeas by reason cf an appeal bond operating as a stay of execution. The super sedeas will be void for want of consideration.'^ If an undertaking is given in pursuance of statute, and to attain a purpose authorized by statute, it is supported by suffi- cient consideration, but the absence of such authority in the la\<. leaves the bond without consideration and void.'' If the judgment appealed from is a nullity, as where the court rendering it had no jurisdiction, the bond will be want- ing in consideration.'* 29 Waller vs. Pittman, 1 N. C. Co. vs. Weber, 4 N. D. 135; 39 N. 324. W. 529. 30 Block vs. Blum, 33 111. App. 3* Hessey vs. Heitkamp, 9 Mo. 643. App. 36. 31 Buttilar vs. Davis, 52 Tex. 74; Contra — Tanquary vs. Bashor, 94 U. S. vs. Morris' Heirs, 153 Fed. Pac. 22; 42 Col. 231. 240. But see Co-onerative A^sn. vs. But see Schmumcker vs. Steide- Rohl, 32 Kan. 663; 5 Pac. 1. Hold- maiin, 8 Mo. App. 302. , ing that the sureties upon a judicial 32 Powers vs. Chabot, 9'3 Cal. 266; bond are estopped from denying 28 Pac. 1070 ; Olsen. vs. W. H. Birch jurisdiction. To the same effect see & Co., 1 Cal. App. 99; SI Pac. 656. Stephens vs. Miller, 3 Ky. L. Eep. 33 Ashley vs. Brasil, 1 Ark. 144; 523. Steele vs. Orider, 61 Fed. Pep. 484; If the trial is had on appeal the Brounty vs. Daniels, 23 Neb. 162; validity of the judgment appealed 36 N. W. 463; Travellers Insurance JUDICIAL BONDS. 319 It has been held that the exaction of a bond in appeal whicli contains conditions more onerous than the law requires, ren- ders the bond wholly void/" This rule can certainly be upheld to the extent of the excessive requirements. A bond with a condition to pay judgment and costs when the latter only is required, is void for want of consideration as to the judgment."" If the appeal bond recites an appellate court which has no ex- istence, the bond has been held void.'^ The ordinary defenses of suretyship apply to appeal bonds, and an imauthorized material alteration of the bond will dis- charge the sureties."* Where the act of a corporation becoming surety upon an ap- peal bond is ultra vires, the doctrine of estoppel does not apply, and the want of contractual capacity is considered a defense."* §183. Immaterial defects in the contract. The law does not favor forfeitures, and unimportant defects in the form of the contract which do not of themselves affect the contractual relation of the parties will not be considered. It is of no material consequence that the wrong date of the judgment is'set out in the bond, if the contract in other respects describes correctly the judgment appealed from.*" Where the from cannot be raised, if tlie Appel- N. Y. 371; Byrne vs. Riddell, 4 La. late Court has jurisdiction. Butler Ann. 3. vs. Wadley, 15 Ind. 502; Knight vs. 37 Tucker vs. State, 11 Md. 322. Waters, 18 Iowa 345. Where the case is transferred ai- 35 Newcomb vs. 'Worster, 7 Allen tor appeal to another county by rea- 198 ; 'Comm. vs. Wistar, 142 Pa. son of the fact that the judge in the 373; 27 Atl. 871; Dennison vs. Ma- county where the judgment was son, 36 Me. 431. But see Kountze rendered was formerly a counsel -in vs. Omaha Hotel Co., 107 U. S. 378. the case, the change of venue will Bradley, J.: "We think the rule not release the sureties, although followed in some of the States is a the court affirming the judgment is sound one, that if the condition of not the one named in the condition an appeal bond, or bond in error of the bond, since the law on the substantially conforms to the requi- subject of the: change of venue ia sitions of the statute, it is sufficient considered as being written into the to sustain it, though it contain va- bond. Barela vs. Tootle, fi6 Pac. ■riitions of language; and that if Rep. (Colo.) 899. further conditions be added, the ss Anselm. vs. Groby, 62 Mo. App. bond is not therefore invalid, so far 421. as it is supported by the statute', sg Best Brewing Co. vs. Klassen, but only as to the superadded con,- 185 111. 37 ; 57 N. E. 20. ditions." *» Handv vs. Burrton Land Co., ssHalsey vs. Flint, 15 Abb. Pr. m Kan. 395; 53 Pac. 67; Pray va. (N. Y.) 367; Pos.t vs. Doremus, 60 Wadsell, 146 Mass. 324; 16 N. E. 266. 320 THE LAW OF SURETYSHIP. appellant's name is omitted from the bond, it is held competent to identify the parties by averment in the pleadings. ''^ Tke omission of the name of the Appellate Court,*^ or the failure of some of the persons named as obligors to sign " are immaterial defects. All informalities are deemed waived by failure to make timely objection.^* The obligee can not stand upon the bond and at the same time object to its informalities. If he secures a dismissal of the appeal on the ground that the appellant has failed to comply with some statutory requirement, he can not thereafter maintain an action on the undertaking based upon a violation of the condition of prosecuting the appeal. *° Issuing execution after the filing of an appeal bond is evi- dence that the obligee does not intend to waive the defects in the bond." §184. Failure to perfect the appeal. If a party fails to perfect his appeal, the bond is liable. Such default is within the express condition of the undertaking, "iWile vs. Koch, 54 0. S. 608; 1032. iStee also Eyndak vs. Seawell, 44N. E. 236. In this case a further 102 Pae. 125; 23 Okl. 759; Brown , , ^ . ^, , J , •„ vs. Melloon, 170 Iowa 49; 152^. W. defect m the bond was urged, in ^g^ ^^^ '^^^ ^^^^^ ' ^^^^^ ^^^ that the bond did not recite the note. amount of the penalty, the place for a Jones vs. Drbneberger, 23 Ind. the insertion of such penalty being 74; Allen vs. Kellam, 94 Pa. 253. left blank. The bond, however, con- 45 Columbia, etc., R. R. Co. vs. teined the stipulation "that the ap- Braillard, 12 Wash. 22; 40 Pac. 382. pellants if the judgment be ad- "^f think that by refusing to M- i^ciiauKo ii 11 J V15 ggp^ ^jjg jjpj^j ^^ sufficient, and by judged against them on appeal, will taking proceedings to have it de- satisfy such judgment and the termined ineffectual for the pur- costs." And it is held that the obli- poses of an appeal, the respondent gation thus expressly assumed was i? '^o* «"t.itl«'i to judgment against ° ,,.,,,., ± ■ i. ''"6 sureties. Here the appeal is not defeated by failure to insert a dismissed because the sureties upon definite amount in the undertaking. the bond are found insufficient, and Simmons v. Sharpe, 56 So. 849; 2 we think it inconsistent that re- Ala. App. 385. spondent should be permitted to ^..f,. T. , „n T^ ■■» treat it as an effectual obligation 42 Stillmgs vs. Porter, 22 Kan. 17. a,fter it has secured an adjudication 43 Railsback vs. Greve, 58 Ind. that is not such." 72; Davis vs. O'Bryant, 23 Ind. App. 46 State vs. Sixth Judicial Dist. 376; 55 N. E. 261; Hentlg vs. Col- Ot., 22 Mont. 449;^57 Pae. 89, 145; lins, 1 Kan. App. 173; 41 Pax;. 1057; " - - ~~ -- Gleeson's Est., 192 Pa. 279; 43 Atl. lins, 1 Kan. App. 173; 41 Pax:. 1057; Hemmingway vs. Poucher, 98 N. Y. 281. JUDICIAL BONDS. 321 wLi«h provides that the appellant will prosecute his appeal to effect. If the appeal is dismissed for want of jurisdiction in the Ap- pellate Court, or for omissions in matters anteeedeLt to the ap- peal, the bond will not be held, for the failure to perfect the appeal under these circumstances is not the fault of the ap- pellant." The consent of the obligee to perfect an appeal after the date limited by law will waive the default, and the sureties will be held.*' Eecitals in the bond that the appeal has been perfected will estop the obligors from claiming otherwise. *° Where the plaintiff in error gave bond in stay of execution conditioned that he would " prosecute his petition in error to effect," and failed to make his co-defendants in the lower court parties in the reviewing court, the question was raised whether after an affirmance of the judgment, the bond was liable, since the error proceeding was not perfected according to law by reason of the defect of parties ; it was held : " The consider- ation of their bond — the stay of execution — has been obtained by them ; and its condition — that he would prosecute his peti- tion in error to effect, or that he would pay the judgment if it should be affirmed - — has not been fulfilled. It is not for him or his sureties, in a 'collateral matter which in no way affects the rights of other parties to the judgment, to deny that the judgment has been affirmed by denying the jurisdiction of the court to which he himself appealed as a court having jurisdic- tion. On every principle of justice he is estopped from so doing, and the estoppel should be applied wherever it is prac- tical without injuriously affecting the rights of others." °" "Gregory vs. Obrian, 13 N. J. L. 111. 580; 4 N. E. 770; Fearons vs. 11. Wright, 6 Ky. L. Rep. 747. See also Wheeler vs. MeCabe, 47 so Bulkley vs. Stephens, 29 0. S. How. Pr. (N. Y.) 283. 620. « Carroll vs. McGee, 25 N. O. 13. See also In re Kennedy, 129 Cal. ^ Thalheimer vs. Crow, 13 Col. 384 ; 62 Pae. 64 ; Cresswell vs. Herr, 397; 22 Pac. 779; Mix vs. People, 9 Col. App. 185; 48 Pac. 155; Rod- 86 111. 329; Meserve vs. Clark, 115 man vs. Moody, 14 Ky. L. Rep. 202; 322 THE LAW OF STJEETYSHIP, §185: Conditions upon which appeal or stay bonds become pay< able. In general, a bond becomes payable upon the affirmance of the judgment or decree, or where a re-trial is had in the Appel- late Court, upon the entering of a judgment against the appel- lant. Such affirmance or judgment must be a final order and of such character that the plaintiff m,ay have execution upon it.°' It is not sufficient that the case has been tried in the Appel- late Court and the dociket entries in favor of the prevailing party entered. There must be an actual entry on the record of an affirmance, or an action upon the bond will be premature.^' Where the Appellate Court enters an original judgment, it was held not sufficient averment in an action upon the bond to allege that the judgment appealed from had been " affirmed." °° Neither is a sufficient cause of action stated by the allegation that the appellant has failed to prosecute his appeal with eSect. An inference that the judgment has been affirmed is readily dravm from such allegations, but a cause of action upon the bond can not be founded upon an inference.^* If the principal may further contest any of the points re- served, the condition of the bond is not broken even though the judgment is affirmed in part. Thus where the condition of the bond was to satisfy the judgment, " if the judgment or any part thereof be affirmed," and the appeal was from a judgment and an order denying a new trial, and it was shown that the order as to the new trial was affirmed, it was held insufficient to charge the bond, there being no showing that the judgment was affirmed. ^^ Flanftagan vs. Cleveland, 44 Neb. 125 Ind. 332; 25 N. E. 349. To the 58 ; 62 N. W. 297. effect that a, presumption of the 51 Parnell vs. Hancock, 48 Gal. filing of a certified copy of affirm- 452; Jordan vs. Agawam Woollen ance arises after the trial in the Co., 106 Mass. 571. Appellate Court. s2 Heath vs. Hunter, 72 Me. 259. b3 Q'Neil vs. Nelson, 22 111. App. But see Perkins vs. Klein, 62 111. 531. App. 5S5. Where it is held not to siMalone vs. MeClain, 3 Ind. 532; be necessary as a, basis of an action Daggitt vs. Mensch, 141 111. 395; upon an appeal bond to file a certi- 31 N. E. 153. fied copy of the affirmance. 56 McCallion vs. Hibernia Sav'g See also Buchanan vs. Milligan, Soc, 83 Cal. 571; 23 Pac. 798. JUDICIAL BONDS. 323 Yet where there is a distinct affirmance of a part of the re- lief granted in the lower Court and the decree or judgment is capable of separation, the bond will be held pro tanto if it is written to cover ' ' whatever judgment may be rendered. ' ' "' An affirmance for a less amount than the original judgment will, under this form of bond, constitute a breach." Also where the appeal was taken from an order sustaining an attachment and from a judgment upon the debt, and the judgment is af- firmed but the order of attachment reversed, it was held to constitute a breach of the bond.'^ An affirmance as to one or more of the parties, and a re- versal as to others, constitutes a breach of the bond.^' A bond to stay execution on a judgment pending a writ of error, the condition of which obligates the surety "to pay the said judgment and costs if the same is not reversed" and to "prosecute its writ of error to effect and pay and satisfy such judgment as shall be rendered against it thereon," obligates the surety to satisfy the final judgment rendered on the writ of error, and the obligation is not discharged by a reversal of the judgment which is followed by a rehearing and an affirm- 56 Harding vs. Kuessner, 172 111. sum of $200 and for a part of de- 125 ; 49 N. E. 1001 ; Holmes vs. fendant's land. The Eewiewing Court Steamer Bell Air, 5 La. Ann. 523. substituted a decree for $3,200 and 57 Hopkins vs. Orr, 124 XJ. S. 510; released the land, and it was held 8 S. Ct. 590. not to be such an affirmance as But see Heinlen vs. Beans, 71 Cail, would bind the sureties for tlie 295; 12 Pac. 1'67; Feemster vs. An- $3,000 added by the Court to the derson, 6 T. B. Mon. (Ky.) 537. decree. Deatherage vs. Shejdley, 50 Mo. 69 Porter vs. Singleton, 28 Ark. App. 490. Holding that an appeal 483; Alber vs. Froelich, 3i9. 0. S! from a decree upon a mechanic's 245 (overruling Liang vs. Pike, 27 lien wherein the decree was affirmed 0. S. 498) ; McFarlane vs. Howell, in part and released in part did not 91 Tex. 218; 42 S. W. 853; Brown constitute a breach of the bond. vs. Conner, 32 N. C. 75 ; Vandyke vs. 58 Krone vs. Cooper, 43 Ark. 547. Weil, 18 Wis., 277; Lewis vs. Maul- See also Oakley vs. Van Noppen, den, 93 Ga. 7.58; 21 S. E. 147; Wood 100 N. C. 287; 5 S. E. 1. In this vs. Orford, 56 Cal. 157; Ives vs. case the condition of the appeal was Hulca, 17 111. App. 35; Gilpin vs. "if, upon said appeal, the said rul- Ilord, 85 Ky. 213; 3 S. W. 143; ing is affirmed, and said alleged lien Lutt vs. Sterrett, 26 Kas. 561 ; John- declared and held valid," the ruling son vs. Reed, 47 Neb. 322; 66 N. W. was affirmed, but the decree did not 405; Hood vs. Mathis, 21 Mo. 308; in terms hold the lien valid. This Reynolds' vs. White, 118 N. Y. S. was considered a substantial affirm- 977 ; Faj-mer's Loan & Trust Co. vs. anoe, and to constitute a breach of Lord, 41 Okl. 569; 138 Pac. 278; the bond. Schnltz vs. United States Fidelity To the same effect see Foster vs. & Guaranty Co., 201 N. Y. 230; 94 Epps, 27 111. App. 235. N. E. 601.' But see Rice vs. Rice, 13 Ind. 56i2. Cook vs. Ligon, 54 Miss. 625. In This was a, judgment for divorce this case the judgment below waa with a decree for alimony in the against the defendant individually 324 THE LAW OP STTEETYSHIP. ance, since the opinion on rehearing is the final judgment."' Where the party appeals to protect a special interest ■which does not concern his co-defendants, and the judgment generally as to the others is affirmed, but reversed as to the appellant, tl bond will not be held for the part of the decree which is af- firmed."" The addition of a new party in the Appellate .Court and the entering of a judgment against both the original and the new party is considered an affirmance within the terms of the bond."* §186. Same subject — Affirmance by failure to prosecute appeal. A dismissal of an appeal for want of prosecution is a con- structive affirmance of the lower court, as it leaves the parties bound by the judgment as originally entered and it will be deemed a breach of the conditions of the bond.*^ A dismissal for want of jurisdiction in the Appellate Court is not equivalent to an affirmance. The distinction has been stated as follows : " A dismissal of a writ of error for want of prosecution when the court has jurisdiction of the case, has always been treated as an affirmance of the decree or judgment within the meaning of the usual conditions of such bonds. But the rule must be different where the court has no jurisdiction in the premises. It is for the obvious reason that the court has and as executor. It was reversed as "i Helt vs. Whittier, 31 O. S. 47S. to the individual liability and af- Contra — Haberer vs. Hansen, 148 firmed as to the representative ca- 111. App. 83. pacity. Held a breach of the bond. 62 Long vs. Sullivan, 21 Colo. 109; See also Dignowitty vs. Staacke, 40 Pac. 359 ; Sutherland vs. Phelps, 25 S. W. (Tex. Civ. App.) 824. 22 111. 92; Coon vs. McCormack, M Where the appeal was from a judg- Iowa 539 ; 29 X. W. 455 ; Chase vs. ment against a principal and surety Beraud, 29 Cal. 138; Simonds vs. and there was also a judgment in Heinn, 22 La. Ann. 296; Comraon- the same action in favor of the wealth vs. Green, 138 Mass. 200; surety against the principal. The Flannagan vs. Cleveland, 44 Neb. judgment against the principal and 58 ; 02 N. W. 297 ; Teel vs. Tice, 14 surety was affirmed, but reversed as N. J. L. 444; Blair vs. Sanborn, to the judgment in favor of the 82 Tex. 686; 18 S. W. 159; Gall- surety. This was considered suffi- breath vs. Coyne, 109 Pac. 428; 48 cient affirmance to hold the bond. Col. 199. In GriefT vs. Kirk, 17 La. Ann. 25, "That the appeal was dimissed on it was held that a judgment against appellant's own motion and without partners affirmed as to one partner prejudice" does not prevent a state did not constitute a breach of the of facts calling for a different con- bond, elusion. Koelling vs. Wachsning, BOO. Culver vs. Fidelity & Deposit 174 111. App. 322. Co., 149 Mich. 630; 113 N. W. 9. Ooniro— Kimball Print'g Co. vs. »o Warner vs. Cameron, 64 Midh. Southern Land Improvement Co., 185; 31 N. W. 42. 57 Minn. 37; 58 N. W. 868. JUDICIAL BONDS. 325 no jurisdiction to pronounce a judgment of affirmance, and it would be a 7wn sequitur to say a court may affirm a decree when it has no jurisdiction to hear the case for any purpose." "' A failure to prosecute an appeal arising from no fault of the appellant will not constitute a constructive affirmance, such as the allowance of an injunction against the appellant restraining him from proceeding with tlie appeal.^* Where the Legislature in pursuance of a constitutional amendment created a new Court of Appeals to which pending cases were removed, and finally affirmed in the court to which they were transferred, the sureties upon the bond were released on the ground that it was no fault of the parties that the appeal was not prosecuted in the court to which it was originally sent, and that it was not within the power of the Legislature to im- pose new conditions upon the undertaking of the sureties with- out their consent and thus validate as to them an affirmance in 8 court not named in their contract. °° An affirmance entered by consent of parties as a compromise or settlement of a controversy will not constitute a breach of the bond, since bonds are executed upon the implied condition that the matters would be submitted to judicial determination.** 83 Blair vs. Reading, 103 111. 375. altogether a different proposition as But see Swofford Bros. vs. Living to his sureties. They are not par- Bton, 65 Pae. Rep. 413. ties to the suit. They are obligors «* Planter's Bank vs. Hudgins, 84 in a collateral undertaking. They Ga. 108; 10 S. E. 501. entered into a private contract and 65 Schuster vs. Weiss, 114 Mo. agreed to be bound on cej tain condi- 158; 21 S. W. 438, GanM, J. . "This tions. Over their contract was the power of the State to change the protection of the Constitution. That mode of proceeding in its courts, contract was made with reference so long as it does not impair the to the law as it then stood. In the obligation of the contract, is too light of that law it must be read. well settled to be brought in ques- After it was made it was secure tion. And where a remedy equally ,from any act of the legislature, or efficacious is afforded to the suitor, amendment to the Constitution im- he cannot be heard to complain. So pairing its obligations." here, while the legislature deprived See also Cranor vs. Reardon, 39 the suitor of a hearing in the Court Mo. App. 306 ; Trader vs. Sale, 18 of Appeals, it at the same time se- O. C. C. 814. cured him a hearing in the court of ee Johnson vs. Flint, 34 Ala. 673; last resort in the State. But it is Osborn vs. Hendrickson, 6 Cal. 175. 326 THE LAW OF SURETYSHIP. This has been so held even though the compromise was made in good faith."' A collusive compromise is unquestionably fraud- ulent and will release the surety. An agreement to abide a 87 Ross vs. Ferris, 18 Hun 210; Shimer vs. Hightshue, 7 Black. (Ind.) 238. Foo Long vs. Amer. Surety Co., 146 N. Y. 251; 40 N. E. 730, An- drews, J. : " The undertaking was to pay the judgment if it should be affirmed, or the appeal should be dismissed, and this, under the cir- cumstances, referred to an affirmance or dismissal in an ordinary course of judicial procedure, and not an affirmance or dismissal by consent of parties. The plaintiff was en- titled to proceed in this appeal ac- cording to the usual practice. He could take an affirmance of the judg- ment by default if the practice of the court permitted that to be done. But to construe the undertaking as permitting the parties to agree up- on the judgment to be rendered would subject a surety to a hazard which could not, we think, have been contemplated It would sacrifice substance to form to hold that an affirmance obtained in this way was an affirmance within the true meaning of the undertaking. It was an affirmance by the act of the parties, and not in any true or real sense an affirmance by judgment of the court. It was not the judicial sentence upon the rights of the par- ties contemplated by the undertak- ing. The question of fraud or col- lusion is not presented." Contra — Drake vs. Smythe, 44 Iowa 410; Quillen vs. Quigley, 14 Nev. 215; First State Bank vs. Stevens Land Co., 119 Minn. 209; 137 N. W. nO'l; Chase vs. Berand, 29 Cal. 138; Bailey vs. Kosenthal, 56 Mo. 385; Howell vs. Alma, 36 Neb. 80; 54 N. W. 126. Amnions vs. Whitehead, 31 Miss. 99, Bandy, J.: "The bonds were executed for the purpose of having the eases retried in the Circuit Court, and their legal effect was to give that court jurisdiction to de- termine the cases, and to render judgment, if necessary, against both the principal and the sureties. Their condition was, substantially, that if the judgments should be there af- firmed, they would abide by and per- form the judgment of the Court to be rendered thereon. From their very nature, the obligation of the sureties was contingent and imcer- tain. They were given for the ex- press purpose of enabling the princi- pal to carry on the litigation; and in the event that it would be un- successful, the law under which tlhey were given provided that the judg- ment should be rendered against both the principal and the sureties. Even if the sureties are not to be considered bound as parties to the judgment, so as to be debarred of the right to complain in a collateral proceeding of what was done in the proceeding, the necessary legal effect of their execution of the bonds was to confer upon the principal the full power to do whatever he might deem necessary and proper in de- fending or determining the suits in the Circuit Court. The principal might have withdrawn all defense and submitted to judgments in the three cases immediately upon their presentation in the Circuit Court; and upon the same reason was au- thorized to compromise the suits upon terms advantageous to himself. This was no violation of the obliga- tion of the sureties, nor variation of the terms of their obligation; for JUDICIAL BONDS, 327 test case is not a compromise, but in a full sense an affirmance by the court and will create a liability against the bond."* If the appeal has been dismissed and thereafter reinstated by agreement of the parties, it has been held that the sureties are liable upon a subsequent affirmance."" The sureties would be liable upon the constructive affirmance resulting from the dis- missal, and the reinstatement would be an advantage rather than otherwise to the sureties as affording an opportunity for a possible reversal. Want of capacity to prosecute the appeal is a breach of the bond. Thus where an affirmance was set aside upon the dis- covery that the appellant corporation had been dissolved before filing the writ of error, the constructive affirmance resulting from the inability and failure to prosecute error was deemed a breach of the bond.'" §187. As to when action may be brought upon bond for appeal. A cause of action will generally arise upon an appeal bond immediately upon affirmance, unless it is postponed by some act of the obligee inconsistent with such right. If the obligee has levied execution upon personal property of the principal, it is held no action can be brought upon the bond until the execution has been disposed of in the manner provided by law.''^ But a levy upon land is said to be no bar to an action upon the bond since such a levy does not deprive the principal either of the possession or use of the land, pending the enforcement of that was entirely contingent and un- this State, that sureties in an appeal certain, except that the parties had, bond are parties to the suit, in the by the necessary legal effect of the sense that they must be consulted in act, submitted themselves to what- regard to any step taken in the case ever might be done in the determina- before final judgment." tion of the suit, by their principal, "> Texas Trunk Ry. vs. Jackson, under the sanction of the court." 85 Tex. 605 ; 22 S. W. 1030. 6S Succession of Simonds, 26 la. 'i Smith vs. Hughes, 24 111. 270; Ann. 31.9. First Nat. Bank vs. Rogers, 13 Minn. «9 Bailey vs. Rosenthal, 56 Mo. 407 ; Clerk vs. Withers, 2 Ld. Raym, 385. "It has never been held in 1072. 328 THE LAW OP SURETYSHIP. the writ, and is not a satisfaction of the judgment/^ Except where required by Statute or the express terms of the bond, it is not necessary to first cause execution to issue against the principal before proceeding against the bond.''' "Where the bond was to secure an appeal from a special judg- ment for taxes, which judgment became a lien upon the land of the defendant, but did not become a personal obligation, it was considered that the liability against the surety was not fixed until execution had been first issued, as such a step was necessary in order to show a non-satisfaction.'* It is not necessary to first make a demand upon the principal before proceeding against the surety upon an appeal bond."* Neither can the sureties require an obligee to first resort to other securities in his possession.'" Summary action upon appeal bonds may be resorted to where the Statutes make such bonds a part of the record, and a separate action need not be instituted, but the Appellate Court enters judgments against the sureties at the time the judgment is afSrmed against the appellant." This is founded on the proposition that such sureties, by the act of signing the bond, become voluntary parties to the suit and subject themselves thereby to the decree of the Court."" It is held that a judg- es Mayo vs. Williams, 17 O. 244. "There is a great difference between a levy upon goods and a levy upon land. The goods are taken from the possession of the owner by the levy, but the owner of the land remains in possession after the levy, and cannot be dispossessed until after the land is sold." Herrick vs. Swartwout, 72 111 340; Robinson vs. Brown, 82 111. 279. 73 Murdock vs. Brooks, 38 Cal, 596; Steinhauer v?. Colmar, 11 Colo, App. 494; 55 Pac. 291; Staley vs. Howard, 7 Mo. App. 377; Trogden vs. Cleveland Stone Co., 53 111. App 206 ; Ayers vs. Duggan, 57 Neb. 750 78 N. W. 29« ; Wallerstein vs. Aimer, Surety Co., 15 N. Y. Suppl. 964 Babbitt vs. Finn, 101 U. S. 7 ; Ful ler vs. Aylesworth, 75 Fed. Rep, 694; Sandoval vs. U. S. F. & G. Co., 100 Pac. 816; 12 Ariz. 348; Bank er's Surety Co. vs. Security Trust Co., 39 App. D. 0. 354. 7* Hunt vs. Hopkins, 83 Mo. 13. 75 Bell vs. Walker, 54 Neb. 282; 74 N. W. 617; Teel vs. Tice, 14 N. J. L. 444 ; Fowler vs. Gordon, 5 Ky. L. Eep. 332; Nelson vs. Donovan, 16 Mont. 85; 40 Pac. 72; Bolles vs. Bird, 12 Colo. App. 78; 54 Pac. 403. 78 Bingham vs. Mears, 4 N. D. 437; 61 N. W. 808; Cox vs. Mulhol- lan, 6 Mart. (La.) 649; Davis vs. Patrick, 57 Fed. Rep. 909; Mix vs. People, 86 III. 329; Day vs. Mc- Phee, 93 Pae. 670; 41 Col. 467. 77 Callahan vs. Saleski, 29 Ark. 216; Hawley vs. Gray Bros. Paving Co., 127 Cal. 560; 60 Pac. 437; Shannon vs. Dodge, 18 Colo. 164; 32 Pac. 61; Kiernan vs. Cameron, 66 Miss. 442; 6 South. 206; Lowe vs. Riley, 57 Neb. 252; 77 N. W. 758; Holbrook vs. Investment Co., 32 Ore- fron 104; 51 Pac. 451; Hickcock vs. Bell, 46 Tex. 610; Mayott vs. Knott, 9i2 Pac. 240; 16 Wyo. 108. 77a Moore vs. Huntington, 84 U. S. 417; U. S. Surety Co. vs. Amer- ican Fruit Co., 40 App. D. C. 239. Beall vs. New Mexico, 16 Wall. 535, Bradley, J.. "A party who enters his name as surety on an ap- peal bond does it with a full knowl- edge of the responsibilities incur- JUDICIAL BONDS. 329 ment by summary process may be entered against the surety even though no notice is given him/' In an action on an appeal bond, evidence of the Appellate Court's judgment against the principal is conclusive against the sureties on the bond of such principal/'" §188. Measure of damages in an action upon aji appeal or stay bond. The amount of recovery upon a bond will be limited in any event to the amount which the law requires to be secured, and if a bond is executed for a sum in excess of that which the Statutes require, it will impose no liability for the excess, such excess of undertaking being void for want of consideration.'"' The amount recoverable will be further controlled by such express words of limitation as are recited in the bond. If the condition is merely to satisfy the judgment appealed from, it will not cover the costs in the Appellate Court. Such costs can only be brought tmder the obligations of the bond by express stipulation or by a condition to perform the judgment of the Appellate Court, although it is held that a bond to pay the judgment of a lower court will cover the costs in that court, without express stipulation, since the costs are a part of the judgment.'" So also, a bond conditioned to satisfy the decree or final order of the Appellate Court, is held not to include the costs of the lower court.'^ A bond was conditioned that the "appellant shall diligently prosecute his appeal to effect and pay all damages and costs awarded against him on such appeal." The judgment of the red. In view of the law relating mere delay) can be subserved by to the subject it is equivalent to a compelling the appellees to bring consent that judgment shall be a separate action on the appeal entered up against him if the bond." appellant fails to sustain his ap- ^s Phelan vs. Johnson, 80. Iowa peal. If judgment may thus be 727; 46 N. W. 68. entered on a recognizance, and ^s® Commonwealth of Pennsylvania against stipulators in admiralty, we vs. ITidelity & Deposit Co., 180 Fed. see no reason in the nature of 292. See also Costello vs. Bridges, things, or in the proviisions of the 142 Pac. 687. Constitution, why this effect should "^ Ante Sec. 199. not be given to appeal bonds in «» Johnson vs. Ward, 21 Ky. L. other actions, if the legislature Rep. 783; 53 S. W. 21; Many vs. deems it expedient. No fundamental Sizer, 6 Gray 141. constitutional principle is involved; si Miohie vs. Ellair, 60 Mich. 73; no fact is to be ascertained for the 61 N. W. 1020. But see Expanded purpose of rendering the sureties Metal Co. vs. Bradford, 177 Fed. liable, which is not apparent in the 604, where it was held that on ap. recoird itself; no object (except peal from the U. S. Circuit Court 330 THE LAW OF SUKETYSIIIP. lower court was reversed in the Appellate Court, but the ap- pellee then appealed to the Supreme Court, where the judg- ment of the Appellate Court was reversed and that of the trial court affirmed. It was held that the bond was liable only for the costs in the Appellate Court and not for those in the Supreme Court.'^" A bond given on appeal from an order overruling a motion to vacate the appointment of a receiver, and requiring appel- lants to prosecute the appeal with effect, or "pay all the costs which have accrued in the court below," binds the surety for costs involved in the subject-matter of the appeal, and not for the costs accrued in the main suit.'^* If the Statute points out the requirements for a bond in ap- peal, and the bond omits some of these requirements, they wiU be supplied by the intendment of the law, and recovery had for the amount the Statute requires.*^ Where the subject matter of the action is within the control of the court, as in the case of the foreclosure of a mortgage or mechanic's lien, or an action to set aside a fraudulent convey- ance where the property is held by a receiver, the law does not require the substitution of a bond for the property pending a review in the Appellate Court. The undertaking in such cases does not cover the amount of the original decree, but only such costs and damages as result from the proceeding in error. This is usually regulated by Statute and the bond carries no larger liabilities than the Statute contemplates.*^" The Federal Statutes limit the liability upon foreclosure ap- peal bonds in cases where the appeal stays execution to " all damages and costs. ' ' This is held to cover only the costs in the Appellate Court, and such deterioration and waste of the prop- erty as results from the delay incident to the appeal, and does to the Circuit Court of Appeals, a bonds will not relieve the sureties surety on a bond for costs is liable from those requirements. Stults vs. not only for the costs in the Appel- Zahn, 117 Ind. 297; 20 N. E. 154. late Court, but also for those in- But see Boulden vs. Estey, 92 Ala. eurred in the court below. 182; 9 South. 283. Where the bond 8ia Breed vs. Weed, 130 Wis. 264; was conditioned for the payment of 110 N. W. 197. costs only, although the Statute re- 816 American Surety Co. vs. Koen, quired a bond to cover costs and 107 S. W. 938; 49 Tex. Civ. App. damaires, and it was held that the 98. liability on the bond was limited to «2 Chandler vs. Thornton, 4 B. its exact language. Mon. (Kv.) 360; Oilpin vs. Hord, s^^Iauder vs. Hunter, 142 N. W. 85 Kv. 213; 3 S. W. 143. 2.51-, 3S S D. 108; Marean vs. In 'Indiana the Statute specifi- Stanley, 34 Col. 91; 81 Pac. 7fl9'; cally provides that omissions of Supeivisors vs. Kennicott, 103 U. statutory requirements for appeal S. 554. JXIDICIAL BONDS. 331 not cover the original decree nor interest pending appeal, nor rents and profits upon the land.^'* The Statute in some of the States requires the appellant in foreclosure to execute a bond conditioned to pay the debt." Where no personal judgment is rendered in an action of fore- 83Kountz vs. Omaha Hotel Co., 107 U. S. 378; 2 S. Ct. 911, Brad- ley, J. (p. 392) : "The plaintiff, in this case, was not entitled to posses- sion, nor to the rents and profits. His foreclosure suit did not seek posses- sion, but sought a sale of the spe- cific thing — the land. In such a case, until the litigation is ended, it doth not appear that there must be a sale, or even that the plaintiff is en- titled to a sale. The defendant in possession is entitled to redeem the land until a, sale is made, and until then he is entitled to the rents and profits, which belong to him as of right. The taking of the rents and profits prior to the sale does not injure the mortgagee, for the simple reason that they do not belong to him. Waste, that is, destruction or injury to the land itself, as before stated, is an injury to the mort- gagee. It diminishes the value of the pledge;, and for such injury no doubt he might recover on the ap- peal bond. Other deteriorations, such as occur by want of repairs, accumulation of taxes, fires not cov- ered by reasonable insurance, and the like, probably might also be fairly covered by the bond. But per- ception of rents and profitsi is iStie mortgagor's right, until final de- ternjination of the right to sell, and the sale is maile accordingly. , The mere delay of the sale for the pur- poses of an appeal does not operate to the legal injury of the mortgagee. It does not suspend execution far the debt As it is the spe- cific thing, the land itself, and not the rents and profits that consti- tutes the pledge, and delay of sale caused by the appeal, as before said, deprives the mortgagee of no legal right. It may be an incidental dis- advantage or inconvenience, but in our judgment it is not a legal dam- age contemplated by the appeal bond." ^^ Miller, J. (dissenting), p. 400: 'In all cases of insolvent mortgagors the rule, as construed by the Court, offers a strong inducement to keep tlie mortgagee out of his money as long as possible, without interest, or any other comipensation for the delay. An insolvent corporation — a railroad company, for instance — makes default in its mortgage bonds, which amount to twice the value of the property mortgaged. A decree is obtained for its sale, and before a receiver can be appointed, the directors take an appeal, give a small bond, little more than the probable costs, and then use the road for three years, making mil- lions of dollars out of it with which to pay debts subsequent to the mort- gage, or distribute among interested parties. No more striking instance of its injustice is needed than «he case before us. A decree for money largely in excess of the value of the hotel mortgage is stayed by a bond foT $50,000, under which the defend- ant, an utterly insolvent corpora- tion, receives rent, or uses the prop- erty to the value of $38,000, while it litigates without a shadow ol rigiht, in this court for three years, and appropriates this $38,000 to its own use, and is not held responsible for this, though the bond expressly mentions 'the use and detention of the property as one of tlie liabili- ties incurred, if the corporation fails to make good its plea." See also, as supporting the view that rents and profits cannot be re- covered upon an appeal .And fore- closure. Wood vs. Fulton, 2 Harr. & G. (Md.) 71; Hutton vs. Lock- ridge, 27 W. Va. 428; Burgess vs. Doble, 149 Mass. 256; 21 N. E. 438. It is held that a bond for stay of execution upon a decree setting aside a fraudulent conveyance covers the rents and profits pending the appeal. Killfoil vs. Moore, 45 S. W. (Tex. Civ. App.) 1024. 84 Whan vs. Erwin, 27 I/a. Ann.' 706. See also Marchand vs. Frellsen, 105 U. S. 423, construing the Louis- iana Statutes. 832 THE LAW OF SUEETYSHIP. closure, no recovery can be had upon the appeal bond for iHa deficiency. ^'^ In an appeal from an order foreclosing a mechanic's lien, it was held that the sureties were not liable for the deficiency, since the owner, in any event, was not liable beyond the pro- ceeds of the property covered by the lien.*° The same rule applies and for the same reason where a junior mortgagee ap- peals. The limit to which any decree can operate against him is to order the deduction from the fund, as a prior claim, of the full amount of the senior mortgage.*' And to the same eSect where a subsequent attaching creditor *' or a person holding in a trust or representative capacity appeals, the latter in no event should thereby incur a liability beyond the value of the assets belonging to his trust.*' An appeal from an order of ejectment will in general obli- gate the sureties for the rents and profits during the time the appellee is kept out of possession by reason of the appeal."" 85 Hinkle vs. flolmes, 85 Ind. 405 ; Berryhill vs. Keilmeyer, 33 Iowa, 20; Knapp vs. Van Etten, 95 Hun 428; 8 K Y. S. 415; Mississippi Val. Trust Co. vs. Somerville, 85 Mo. App. 265. But see Kogers v. Min- neapolis Threshing Mach. Co., 48 Wash. 19; 95 Pac. 1014. 8« Sosman vs. Conklin, 6'5 Mo. App. 319 ; Mareau vs. Stanley, 34 Col. 91; 81 Pae. 759. See also Copeland vs. Dixie Lumber Co., 57 So. 124; 4 Ala. App. 230. s'Willson vs. Glenn, 77 Ind. 585. 88 Friedrnfan. vis. Lemle, 38 La. Ann. 654. 80 Lunsford vs. Baskins, 6 Ala. 512; Fitzpatrick vs. Todd, 79 Ky. 524. Contra — ^Yates vs. Burch, 87 N. Y. 409, Dcmforth, J.: "Although it should be conceded that the original judgment could have been enforced against the defendants therein only to the extent of assets in hand,, after payment of prior claims, the conces- sion would not aid the defendants here. Their promise or undertaking was upon suiBcient consideration, and by reason of it the judgment- creditors were prevented from pur- suing such property as might be in possession of the judgment-debtors, or marshalling the assets; they can not therefore successfully urge that the judgment could not have been collected. The considerations now advanced for the purpose, and also set out in the answer, might have availed upon an application to the court below to dispense with or limit the security to be given upon appeal, but after an unsuccessful appeal, cannot avail against the se- curity in fact given, and which may well be construed as an admission of the possession of sufficient assets to pay the judgment." See also Schmumcker vs. Steide- niann, 8 Mo. App. 302. soCahall vs. Citizens Mut. Bldg Assn., 74 Ala. 539; Miller vs. Vaughn, 78 Ala. 323; Hays vs. Wil- stach, 101 Ind. 100 ; Adams vs. Gil- christ, 63 Mo. App. 639; Gleeson's Est., 192 Pa. 279; 43 Atl. 1032; St. JUDICIAL BONBS. ^33 Attorney fees in resisting an appeal are not recoverable as damages upon the bond."'^ It bas been held that the bond is liable for nominal damages, although the appellant pays the judgment and costs upon affirm- ance."" The bond will be liable for the judgment of the Appellate Court, even though the amount is in excess of the judgment ap- pealed from.°° Where the judgment in the Appellate Court is rendered against both the principal and surety, and the amount of it with costs exceeds the penal sum named in the bond, such judg- ment as against the surety is erroneous. °* Interest can be recovered as damages for the detention of the payment of the penalty after it becomes due, and in an action upon an appeal bond, the judgment appealed from togeth- er with interest may be recovered, even though the addition of the interest increases the amount beyond the penalty named in the bond, and the interest period begins to run from the time the surety should have paid, which would be the time of demand, and the bringing of the action is sufficient demand. "' Louia Smelting Co. vs. Wyman, 22 92 George vs. Bischoflf, 68 111. 236. Fed. Rep. 184; Norton vs. Davis, 13 as Cooper vs. Rhodes, 30 Iva. Ann Tex. Civ. App. 90; 35 S. W. 181; 533. Tarpey vs. Sharp, 12 Utah, 333 ; 43 oi Zeigler vs. Henry, 77 Mich Pa«- 104. 480; 43 N. W. 1018. An appeal in an action to quiet But see Tyson vs. Sanderson, 45 title does not charge the appellant Ala. 364. Where it is held that a upon the bond for the rents and recovery can be had for the full profits accruing during his posses- amount of a guardian's bond and sion pending appeal. Carver vs. the costs of the action in addition Carver, 115 Ind. 539;/ 18 N. E. 37. See also State vs. Homey 44 Wis "Kellogg vs. Howes, 93 Cal. 586; 615. 29 Pac. 230; Noll vs. Smith, 68 Ind. selves vs. Merchant's Bank 12 1«8; Deisher vs. Gehre, 45 Kas. 583; How. 159; Crane vs. Andrews' 10 26 Pac. 3; Williams vs. Fidelity & Colo. 265; 15 Pac. 331. Deposit Co., 42 Col. 118; 93 Pac. Whereatt vs. Ellis,- 103 Wis. 348- 1119; Higginsi vis. J. I. Case Thresh- 79 N. W. 416, Marshall, J. : "It was mg Mach. Oo.,_144 N". W. 1037; 95 an an* Parrott vs. Kane, 14 Mont, csted,' either in the original con- 23; 35 Pac. 243; American Bond- tract or in the judgment rendered ing Co. vs. Rudolph^ 127 Pac. 133; thereon by the justice of the peace, 53 Col. 389. within the contemplation of the sec- But where in the case appealed tion of the statute quoted. In the obligee has appeared in court respect to this judgment, he was a. and asserted that he had obtained mere volunteer, who, at the instance no judgment and thereby caused the of the defendant, voluntarily obli- appeal to be dismissed, the sureties gated himself to pay the judgment upon the appeal bond are not there- rendered against his principal, by after estoipped to deny the cxist- said justice, and all costs occasioned ence of the judgment recited in the by the appeal, in case the appeal bond given by them. I/invill vs. was dismissed by the Circuit Court, McDo^Vdll, 127 111. App. 303. as we have seen was done. It cannot i^^ Meserve vs. Clark, 115 111. 580; affect the standing oi appellee, or 4 N. E. 770. discharge his obligation, that his See also Dunterman vs. Storey, 40 principal might, either at law or in Neb. 447; 58 N. W. 949; Healy vs. equity, have avoided the judgment." Nevrton, 96 Mich. 228 ; 55 N. W. 666. See also Watson vs. Johnson., 13 loo Ante Sec. 201; Gudtner vs. Ky. L. Rep. 336. Kilpatriek, 14 Neb. 347; 15 N. W. i02Piercy vs. Piercy, 36 N. C. 708; Flannagan vs. Cleveland, 44 214; Supreme Council vs; Boyle, 15 Neb. 58; 62 N. W. 297; Love vs. Ind. App. 342; 44 N. E. 56. Rockwell, 1 Wis. 382. JUDICIAL BONDS. 337 and is unknown to the common law, and is in force in nearly all the States. The statutory provisions for stay of execution in the Justice Court, for the most part, relate to the susptension of the right of execution without conferring a right of review in the Appel- late Court, although the statutes of the various States provide also for a petition in error to the higher court, with or without bond. The statutory requirements as to the time within which ap- peal bonds can be filed are mandatory, and the filing of a bond after this limitation has expired gives the Appellate Court no jurisdiction, and creates no liability on the bond.^"' Where the statute provides that the appellant shall give bond conditioned to pay the judgment below, if the appeal is dis- missed, and the bond merely recites that he vdll pay the judg- ment of the Appellate Court, the requirement of the statute becomes a part of the bond by intendment of the law, and if the appeal is not prosecuted, the sureties will be held.^"^ §192. Bonds to procure injunction. As a general rule the extraordinary relief by injunction will not be granted, except upon the condition that the plaintiff exe- cute a bond either to the defendant or the State for the use of the defendant, conditioned to pay such damages as result in ease it is finally decided that the injunction ought not to have been granted. Nearly all the States have now so provided by Statute, and 107 McCarthy vs. Holden, 54 Kan. to effect, and "without unnecessary 313; 38 Pac. 261; Martin vs. Crok- delay, and that if judgment is ad- er, 62 Iowa 328; 17 N. W. 533; judged against him on the appeal, Brown vs. Mo. Pac. Ry. Co., 85 Mo. he will satisfy such judgment and 123. costs." Sec. 6584 R. S. 0. Contra — Adams vs. Thompson, 18 These conditions were held to be Neb. 541; 26 N. W. 316. indispensable to the appeal, and losLux vs. McLeod, 19 Col. 465; where the condition as to prosecut- 36 Pac. 246. In Ohio the Statute ing the appeal to effect was omitted, requires a bond for appeal from the it was considered sufficient ground judgment of a justice of the peace for dismissal of the appeal. Job vs. to contain the conditions " that the Harlan, 13 O. S. 485. Appellant will prosecute his appeal 338 THE LAW OF STJEETYSHIF. such statutes generally make the injunction order inoperative until the undertaking is furnished.^"^ Where the statute does not expressly provide for an under- taking as the condition of an injunction, a Court of Equily will require the plaintiff to give a bond in all cases where there is any reasonable probability that the injunction will expose the defendant to damages.^^" ISTo recovery for damages ca'n be had against a plaintiff who secures an injunction except upon his special promise or bond, unless circumstances are such as to warrant an action for ma- licious prosecution. A party may invoke all the remedies pro- vided for by law for the enforcement of his rights without in- curring a liability for damages for so doing. The bond which the law provides as a condition precedent to an injunction, is therefore, the only recourse of the defendant, if he has been damaged by a wrongful injunction. The surety upon an injunction bond does not, like the ordi- 108 state vs. Rush Co. Com'rs, 35 Kan. 150; 10 Pac. 535; Diehl vs. Friester, 37 O. S. 473; Miller vs. Parker, 73 N. C. 58. In South Carolina, the Statute (Sec. 6194) provides that "the Court or judge shall require a writ- ten undertaking on the part of the plaintiff, with or without sureties, to the effect that the plaintiff will pay to the party enjoined, such dam- ages, not exceeding an amount to be specified, as he may gustain by rea- son of the injunction, if the Court shall finally decide that plaintiff was not entitled thereto." This statute is not construed as an im- perative requirement for a bond be- fore an injunction can become op- erative, and it is held that an in- junction allowed without a bond is valid if the bond is thereafter given within a reasonable time. Meinhard vs. Youngblood, 37 S. C. 223; 15 S. E. 947. 110 Macon & B. E. R. Co. vs. Gib- son, 85 Ga. 1; 11 S. E. 442, Bleck- ley, G. J. : " A court of equity, or a court of law in the exercise of equi- table functions, may, and should al- ways impose Just terms as a condi- tion to its interference by interlocu- tory injunction in behalf of suitors. The granting and continuing of an injunction is not a, matter of strict right in the parties, but of sound discretion in the judge or the court. " In the exercise of such discre- tion, it seems highly inexpedient to hold one of the parties to the litiga- tion absolutely bound, while the other party remains perfectly free. This would have the appearance of subjecting the former to the will or even the caprice of the latter." See also State vs. Wakely, 28 Neb. 431; 44 N. W. 488; Smith vs. Kuhl, 26 N. J. Eq. 97. JUDICIAL BONBS. 339 naiy promisor in suretyship, agree to pay the debt of another, and his undertaking is not collateral to a promise or obligation of his principal, except in cases where the principal also signs the bond, or in some other way obligates himself to respond to the damages resulting from his injunction. The United States Supreme Court has held " without a bond for the payment of damages or other obligation of like effect, a party against whom an injunction wrongfully issues can re- cover nothing but costs, unless he can make out a case of mali- cious prosecution. It is only by reason of the bond, and upon the bond, that he can recover anything." ^^^ §193. When action for damages upon an injunction bond ac- crues. No cause of action arises upon an injunction bond until it is finally determined that the injunction ought not to have been granted. This determination must be by a judgment of tlie court, or something equivalent thereto. A dismissal of an action without prejudice because some of the defendants were not served, is held not to constitute a breach 111 Meyers vs. Block, 120 U. S. 545; 43 N. E. 456; Manlove vs. 211; 7 S. Ct. 525. Vick, 55 Miss. 567; Campbell vs. Hayden vs. Keith, 32 Minn. 277; Carroll, 35 Mo. App. 640; Palmer 20 N. W. 195, Vanderburgh, J.: vs. Foley, 71 N. Y. 106; Mark vs. "The plaintiflfs contend that when Hyatt, 135 N. Y. 306; 31 N. E. 1099. the Court, pursuant to the statutes, In the case of Newark Coal Co. orders the writ to issue, the right to vs. Upson, 40 0. S. 25, it was held — the actual damages accrues as an " It may now be considered the ap- incident to the allowance and issu- proved doctrine, that, an action for ance of the process, whether a bond malicious prosecution of a civil suit is filed or not, and that in case a may be maintained, whenever, by bond with sureties is filed, as re- virtue of any order, or writ, issued quired by the statute, it is to be re- in the malicious suit, the defendant garded sinjply as a further or addi- in that suit has been deprived of tional security for such damages. his personal liberty, or of the pos- We are unable to assent to this. The session, use, or enjoyment, of prop- bond is not cumulative, but the only erty of value. The name, or form, security of the defendant in the in- of the writ, or process, is imma- junetion suit." terial. It may be an .order of arrest, See also Asevado vs. Orr, 100 Gal- or of attachment, or of injunction. 293; 34 Pac. 777; Harless vs. Con- "The malicious prosecutor cannot flumers' Gas Trust Co., 14 Ind. App. shield himself behind the interlocu- 340 THE LAW OF SUEETYSHIP. of tiie bond, as it is not thereby determined that no injunction should have been allowed.^^^ But a dismissal of an action for want of prosecution is such a final determination as amounts to a finding that the injunc- tion ought not to have been granted, there being no express reservation of a right to institute a further action upon the same cause."* So also a voluntary dismissal by the plaintiff, while not a de- termination by the court, of the merits of the question as to, whether the plaintiff was entitled to the injunction allowed, yet it is equivalent to a judgment, since the court would be justified in finding that by the act of dismissal, the plaintiff admits that he is not entitled to the injunction/^* But an agreement by the parties that an injunction shall be dismissed, releases the sureties, since in effect it is a waiver by the defendant of his right to damages^ ^° Where the action of the court, dissolving an injunction, is based upon some facts or circumstances arising after the allow- ance of the writ, such dismissal has no relation to the merits of the issued upon which the injunction was originally granted, and it is not a judicial determination that the writ was wrong- fully issued, and hence, does not constitute a breach of the bond."" tory order of the judge, baaed upon n* Frahm vs. Walton, 130 Cal. his own malicious, ex parte applica- 396; 62 Pac. 618; Alliance Trust Co. tion and affidavit." vs. Stewart, 115 Mo. 236; 21 S. W. 112 Krug vs. Bishop, 44 0. S. 221. 793; iSharpe vs. Harding, 65 Mo. But see Yale vs. Baum, 70 Miss. App. 28; Pacific Mail iS. S. Co. vs. 225; 11 South. 879; Mitchell vs. Lenling, 7 Abb. Pr. (N. S.) 37; Sullivan, 30 Kan. 231; 1 Pac. 518. Pacific Mail S. 9. Co. vs. Toel, 85 113 Penniman vs. Richardson, 3 N. Y. 646; Eoach vs. Gardner, 9 La. 101; Whitehead vs. Tulane, 11 Gratt. 89; Mayor of East Lak« vs. La. Ann. 302; Manufacturers' & De Vore, 53 So. 1018; 169 Ala. 237. Traders' Bank vs. Dare, 67 Hun. 44 ; 115 Large vs. iSteer, 121 Pa. 30; 21 N. Y. S. 806; Kane vs. Casgrain, 15 Atl. 490; Prefontaine vs. Rich- 69 Wis. 430; 34 N. W. 241; Dowl- ards, 47 Hun. 418. ing vs. Polaek, 18 Cal. 625. us Apollinaris Co. vs. Venable, The rights and liabilities of the 136 N. Y. 46; 32 N. E. 555. In this parties to the injunction bond are case after the preliminary injunc- fixed when it is determined that the tion was allowed, the plaintiff was injunction ought not to have been adjudged to be in contempt of court, granted. Berkey Co. vs. iSyivania' and as a punishment, the Court Co., 97 Ohio St. 73, 119 N. E. 140. directed that the complaint be dis- missed and the injunction dissolved. JUDICIAL BONDS. 341 Thus where pending a final hearing of an action in which a temporary injiinction had been allowed, the defendant died, and on that account the injunction was dissolved and the action dis- missed, it was held that the representatives of the deceased de- fendant had no cause of action on the hond.^^^ Where the form of the bond is to respond in damages " pro- vided the injunction is dissolved " and does not recite the more usual condition with reference to a judicial finding as to the merits of the grounds upon which th© writ was issued, it is im- Andrems, J.: "We are of the opdnion that the disnaiasal of the complaint and the dissclntion of the injunction under the circum- stances stated, did not, either in fact or in law, constitute an adjudi- cation that the plaintiti' was not en- titled to the preliminary injunction in the action. ' That question was not before the court, and was not and could not have been decided in the contempt proceedings. The un- dertaking related to the right of the plaintiff to a temporary injunction at the commencement of the action, and the obligation assume(? by the sureties was to pay damages in case the Court 'finally decides that the plaintiff was not entitled thereto.' "The sureties upon such an un- dertaking may be held in some cases, although there has been no formal adjudication against the right to the temporary injunction. Where the plaintiff eon parte, and without the consent of the defendants, en- ters an order vacating the injunc- tion and discontinuing the action, this is equivalent to an adjudica- tion that the plaintiff was not en- titled to the injunction when granted. The purpose of requiring an undertaking would be thwarted if in such a case the sureties were not held. (Pacific Mail S. S. Co. vs. Toel, 85 N. Y. 646.) ' " It would seem, upon the same principle, that if the case was dis- missed upon the application of the defendant for wanit of prosecution, the inference should be indulged that no right to an injunction ex- isted when it was issued, and the dismissal should be treated as an adjudication against the right. " But where, as in the present oaise, the defendants secure a dismissal of the action, and a dissolution of the injunction upon some matter aris- ing subsequent to the commence- ment of the action and having no relation to the merits, either di- rectly or by inference, it 'would, we think, be contrary to the natural or reasonable interpretaibion of the transaction to hold that the dismis- sal was a determination by the court that the plaintiff, at the time the temporary injunction was is- sued, 'was not entitled thereto,' and especially would it be contrary to principle to so adjudge against the sureties in the undertaking." See also Palmer vs. Foley, 71 N. Y. 106; Worden vs. Klag, 13 Ohio C. C. 627. In the case last citedi the injunction restrained the party from proceeding upon an action in ejectment pending in a justice court awariting the detenminaition of an equitable action in another court, the justice court not having equit- able jurisdiction. The equity case being determined against the • in- junction plaintiff and the injunction dissolved, action was brought on the bond. The Court holds: "The party was compelled to resOTt to a court of equity to obtain relief in regard to matters that could noit be set up as a defense- in an action of detainer, and so the Court issued an injunction, and it was rightfully issued. She was rightfully in pos- session until after the decision oi the Court It is not de- cided, and ought not to be decided, that the injunction was im.properly issued. We think the plaintiff was entitled to the injunction until the decision of the case, and that there has been no breach of the condition of the bond." 1" Johnson vs. Elwood, 82 N. Y. 362. 342 THE LAW OF SURETYSHIP. material whether the order of dissolution is based upon facte arising before or after the allowance of the writ/^' Where the injunction is dissolved because of an insufficient bond, it constitutes a breach of the undertaking.^^' A submission of a case to arbitration which results in a dis- missal of the controversy and a dismissal of the injunction, does not constitute a breach of the bond. The agreement of the parties to abide by the arbitration, whether right or wrong, is a settlement of the issues without judicial determination and can not be substituted for a decision by the court that the injunction ought not to have been granted, it is in effect a dissolution by consent and a waiver of damages.^^" 113 All'ance Trust Co. vs. Stewart, 115 Mo. 236; 21 S. W. 793. 119 Betts vs. Mougin, 15 La. Ann. 52. 120 Columbus, Hocking Valley & Toledo Ey. Co. vs. Burke, 54 0. S. 98; 43 N. E. 282, Minshall, G. J.: " In a decision by the Court the law requires that it shall conform to the law and the facts of the case, if it do not, by taking the proper steps, its judgment may be reversed by the proper tribunal at the suit of the party aggrieved. But such is not the case as to the award made by the arbitrators in this instance, un- der the agreement of submission be- tween the parties. It is true that the issues of law and fact between the parties in the case were referred to the arbitrators to be heard and determined as a court. But whether they so heard the case or not, whether they erred both as to the law and the facts, no remedy was provided, and none could be had, however erroneous their award might be in point of law and fact. They heard the case as a quasi court at most, not as ministers of justice appointed by the law ; and their judgment was to be, and is. final and irreversible by any tri- bunal. If there had been a provi- sion that the award should be made a rule of court, and subject to he set aside or confirmed by it on a review of the law and facts on which it was made to rest, there would be some ground for the argument, that it is the equivalent of the decision required by the bond When a plaintiff obtains an injunction by giving a bond to answer for such damages as may be caused the de- fendant by its allowance, and after- wards, voluntarily and without the consent of the defendant, dismisses his action, there is much reason for holding that he should be estopped to say, in an action on the bond, for the recovery of damages, that it has not -been decided that the injunction ought not to have been granted. For, in such case, he, by his own act, has prevented the defendant from having such a decision. And such is the substance of the holding in the various cases cited by counsel for the defendant in error. " But none are cited, and we have found none, that the same rule ap- plies, where the dismissal is with the consent of the defendant. JUDICIAL BONDS. 343 A dissolution of an injunction as to a part of the relief prayed for in the writ,"^ or as one of several parties en- joined/^^ does not constitute a breach of the bond. Even though the temporary restraining order has been dis- solved upon motion, no action can be maintained on the bond, until a final determination of the cause in vrhich the injunction was issued."' §194. Construction of bonds to procure injunction. The liability of a surety upon an injunction bond is stricti juris and the form of the bond as well as all the elements essen- tial to a valid contractual relation vsrill be taken into account. It is the bond, and not the order under vsrhich it was given, which constitutes the contract, and the language of the bond cannot be enlarged by reference to the terms of the order.'-^" There must be a consideration, and where the bond is given after the injunction has issued it lacks a valid consideration and the sureties are not liable.^-^ So also if the penalty and conditions of the bond exceed the requirements of the statute, it will, to the extent of such excess, be inoperative for want of consideration.^^^ Parol evidence cannot be received to remedy defects in the "And there is not the same reason Contra — Gray vs. South & North for holding that it should. In such Alabama R. R. Co., 50 So. 352; 162 case the defendant has an oppor- Ala. 262. tunity to insist that, before the dis- 123 Clark vs. Clayton, 61 Cal. 634; missal is had, the court determine Kilpatriok vs. Haley, 6 Col. App. whether the injunction ought to 407; 41 Pac. 50S; Bank of Monroe have been granted, so that an action, vs. Gifford, 65 Iowa 648 ; 22 N.W. 913. may be prosecuted on the bond, if Oohn vs. Lehman, 93 Mo. 574; 6 such is his purpose. If he fails to S. W. 26'7. In this case the pre- do this, and consents to the dismie- liminary injunction was dism!issed sal of the action, his conduct is on motion, and on final hearing, the consistent with the inference that case was dismissed. An appeal was he intends to waive any right he taken to the Federal Supreme Court, may have on the bond." but without supersedeas, and it was 121 Walker vs. Pritdhard, 34 111. held that the right of action on the Aipp. 65. bond was suspended during the ap- Contra — Pierson vs. Ells, 46 Hun peal. 336. See also Yazoo & M. V. R. R. Co. In Crawford vs. Atlantic Coast vs.Adams, 78 Miss. 977; 30South. 44. Lumber Co., 89 S. C. 456; 71 S. E. Contra — Howard vs. Lindeberg, 1049, it was held that where an 2 Alaska 301; Gray vs. South & injunction is sustained in part, the North Alabama R. R., 50 So. 352; defendant is entitled to such dam- 162 Ala. 262. ages under the injunction bond as 123a American Exchange National he has suffered by reason of so Bank vs. Goubert, 210 N. Y. 421 ; much of the injunction order as has 104 N. E. 928. not been sustained. 124 Carter vs. Mulrein, 82 Cal. i"Ovington vs. Smith, 78 111. 167; 22 Pac. 1086. 250. 125 Lambert vs. Haskell, 80 Cal. 611; 22 Pac. 327. 344 THE LAW OF SUBBTYSHIP. form of the bond/^* but. words of doubtful meaning will be con- strued if possible to avoid a forfeiture.^^^ The clerical omission of words which are necessary to com- plete the sense of the instrument, and which are obviously left out by mistake, will be supplied by construction, as for example, the omission of the word " dollars " from the penalty clause."' A recital in a bond that the injunction has been allowed is not conclusive of that fact, and the sureties are not estopped from showing that the order did not issue.^^° But it is held that the sureties are estopped from denying a recital in the bond that the injunction was issued on condition that the plaintiff execute the bond.^^" Where the bond contains a misrecital of material facts, but contains a reference to records in which the facts are correctly stated, the reference for the purpose of construction becomes a part of the bond itself.^^^ §195. Defenses of sureties upon injunction bonds. The sureties, who by their bond, assist the plaintiff to invoke the extraordinary remedy of restraint upon the defendant will be estopped from claiming as a defense that the court issuing the writ had no jurisdiction, ^^^ or that the writ was issued with- 126 Copeland vs. Cunningham, 63 bond the sureties claimed that the Ala. 394. undertaking was void on that ae- 127 Lambert vs. Haskell, 80 Cal. count. Held — "The question we 611; 22 Pac. 327; Shreffler vs. Na- must determine is whether the de- delhoffer, 133 111. 536. fendant in such action had the right 128 Harman vs. Howe, 27 Gratt to resist the making of the order 676. and to apply to the courts for its 129 Adams vs. Olive, 57 Ala. 249. dissolution, and after having suc- 130 Hamilton vs. State, 32 Md. cessfully done so, hold the plaintiff 348. ' upon his bond for the necessary ex- 131 Williamson vs. Hall, 1 0. S. pense incurred in the proceeding. 190. If the contention of the appellees is 132 Robertson vs. Smith, 129 Ind. the correct one, the position of a 422; 28 N. E. 857. In this case it party against whom an injunction was conceded that the Court grant- has been granted by a court of gen- ing the injunction had no jurisdic- eral jurisdiction is an embarrassing tion over the person of the de- one. He must determine for him- fendant, and when sued upon the self whether the court has jurisdic- JUDICIAL BONDS. 345 out probable cause.^'^ Where the prohibition of the writ is directed against the doing of an act which the defendant never intended to do, the injunction, for this reason, can do no injury to the defendant, and no recovery can be had on the bond.^" Where the defendant was enjoined from negotiating a note and answered that he did not intend to negotiate the note, it was held that there could be no recovery on the bond as the defendant had not been injured.^^° It is no defense to an action upon an injunction bond that in another action involving the same issues the injunction was sustained."" tion to make the order. If, in ad- dition to the proposition of law in- volved, there are disputes concern- ing the place of his domicile, he must, at his peril, determine hovf that question of law and fact will ultimately be decided. If he con- cludes that the court has not juris- diction, and disobeys its order, he will be fined and im,prisoned for contempt. If, on the other band, he concludes to obey the order, and leave it to the court to determine the question of its validity, then, by it, he has no> remedy. We have however much he may be injured arrived at the conclusion thart neither reason nor the weight of authority will compel a litigant to occupy this anomalous position. An injunction cannot be granted with- out a bond. The agreement in the bond to pay damages resulting from it is clear and explicit. Damages must, from the naiure of the case, result if the defendant is restrained from doing that which he has a right to do. He must resist the order, and must, by himself or coun- sel, defend himself against proceed- ings for contempt. He can not go his way as though no sudi order had been granted, however invalid and unauthorized it may be. It can not fairly be said that he has an eilection to disregard the order, for he is put in a position where he must vindicate his rights, one way or another, before a court. This being true, it would seem (re- markable that he should be required to do this at his own expense, when there is a bond given for the very purpose of protecting him from the wrongful action of the court." Cumberland Coal & Iron Co. va. Hoffman, 39 Barb. 16; City of Boise City vs. Randall, 66 Pac. Rep. (Idaho) 938; Loomis vs. Brown, 16 Barb. 325; Walton vs. Beveling, 61 111. 201; Hanna vs. McKenzie, 5 B. Mon. 314; Adams vs. Olive, 57 Ala. 249; Littleton vs. Burgess, 91 P. 832; 16 Wyo. 58. 133 Cox vs. Taylor's Adm., 10 B. Mon. 17 ; Hornback vs. Swope, 8 Ky. L. Rep. 533. 134 Hayes vs. Chicago Gravel Co., 37 111. App. 19. 135 Bank of Monroe vs. Gifford, 70 Iowa 580; 31 N. W. 881. 136 Swan vs. Tinmions, 81 Ind. 243. 346 THE LAW OP SURETYSHIP. Where an injunction bond is conditioned to pay all costs awarded against the plaintiff and all damages incurred, in case the injunction is dissolved, the bond remains in force until the case is finally disposed of on appeal, though the in- junction was made permanent in the lower court and reversed on appeal.^^'"' Obedience to the writ is not a condition of recovery on the bond; and disobedience cannot be set up as a defense to a suit on the bond."'" §196. Measure of damages for breach of injunction bond. A recovery upon an injunction bond is limited to damages which flow directly from the restraining order, and although there has been a nominal infraction of the defendant's rights, unless it results in an injury, the bond is not liable. "Where the defendant was restrained from using the water of a ditch for irrigating his land, it was held that he was not entitled to recover on the bond after the dissolution of the injunction, it being shown that by reason of the scarcity of water, no benefit would have been received from the ditch had the injunction not been granted.^^' Damages resulting indirectly from the restraining order can not be recovered. Thus, where the owners of a stock of mer- chandise were enjoined from disposing of the same, the loss of profits was, considered a remote damage, although it was shown that prior to the injunction order the business had made a large profit.^'^ Also where a defendant was divested of his 1360 Galumbia Amusement Co. vs. i37 Msick vs. Jackson, 9 Col. 536; Pine Beach Inv. Co., 63 S. E. 1002; 13 Pac. 542. 109 Va. 325; Moore vs. Lachmund, iss Hibbard vs. McKindley, 28 lU. 117 P. 1123; 59 Ox. 565. 240; Chicago City Ey. Co. vs. Howi- Contra — Houghton vs. Meyer, 208 son, 86, 111. 215; Epenbaugh vs. U. S. 149; Webber vs. Wilcox, 45 Goocli, 15 Ky. L. Eep. 576. Gal. 301; Laanbert vs. Haskell, 80 See also Sensenig vs. Pari^, 113 Oal. <511; 22 Pac. 327. Pa. 115; 5 Atl. 11; Moorer vs. An- ise!) pjioenix Pad Co. vs. American drews, 39 g. C. 427; 17 S. E. 948; Coat Co., 11,1 Md. 549; 75 Atl. 394; Lewis vs. Collier, 47 So. 790. Oolcord vs. Sylvester, 66 111. 540. JUDICIAL BONDS. 347 property by an injunction and the appointment of a receiver, it was held that no recovery could be had on the injunction bond for damages resulting from the bad management of the receiver.'^' i A plaintiff may recover damages for loss of his business resulting from an injunction, provided the business is an established one and has been operated for such a length of time that profits are ascertainable with reasonable certainty and definiteness/^'*'* The depreciation in value of property withdrawn from the market by the injunction is a direct result of the restraint, and a proper subject of recovery on the bond.^*° Where the injunction results in the detention of money, the measure of damages is the legal rate of interest.'''^ If the collection of a judgment is enjoined, interest on the judgment may be reeovered.^*^ But it was held that where a sale of land upon execution was enjoined, that the plaintiff can not recover interest on the pur- chase price from the time of the injunction to the time of sale."' Loss of time and wages occasioned by injunction are a proper element of damages providing due diligence is used in seeking other employment.^** So also where the defendant is under contract to pay salaries and wages to employees, and his business is suspended by the injunction, the bond is liable for the wages."^ 139 Hotchkiss vs. Piatt, 8 Hun 46 ; i*i Heyman vs. Landers, 12 Oal. Lehman vs. McQuown, 31 Fed. Rep. 107. 138; Wood vs. Hollander, 84 Tex. 1*2 Amis vs. Bank of Ky., 8 La. 394; 19 S. W. 551. Ann. 441; Weatlierby vs. Sliackle- 139a Whiteihead vs. Cape Henry ford, 37 Miss. 559. Syndicate, 68 S. E. 263; 111 Va. "s Colby vs. Meservey, 85 Iowa 193; Lambert vs. HaskeU, 80 Oal. 555; 52 N. W. 499. 611; 22 Pac. 327. But see Hill vs. Thomas, 19 S. C. 1*0 Meysenburg vs. Schlieper, 48 230. Mo. 426 ; Lallande vs. Trezevant, 39 1** MuUer vs. Fern, 3'5 Iowa 420. La. Ann. 830; 2 South. .573; 5 "s Wood vs. State, 66 Md. 6a; 6 South. 862; Dougherty vs. Dore, 63 Atl. 476. Oal. 170; City of Clay Center v. Williamson, 100 P. 59, 79 Kans. 486. 348 THE LAW OP SUPETYSHIP. It was held where one is enjoined from the collection of debts, and the debts are barred by the Statute of Limitations pending the injunction, that the sureties upon the bond are liable for the amount of the debts so barred.^*" Mental strain and anxiety which the defendant suffers in consequence of the injunction are not a proper subject of damages."' Where the injunction opera,tes to deprive the defendant of his right to the possession of land, the value of the use and occupation during the pendency of the writ, is an element of damages, and the measure of the use and occupation is the rental value,^** or where the use of the land by the owner in his business can be made the subject of approximate computation, the recovery can be had for this amount.'^*" §197. Same subject — Defendant's expenses in procuring a dissolution of injunction. While a defendant can not recover compensation for the loss of his own time expended in procuring a dissolution of a wrong- ful injunction,^"", yet he may recover all actual and necessary i*« Terrell vs. RigersoU, 78 Tenn. injury. . Every litigation 77. requires more or less time and 14' Cook vs. Chapman, 41 N. J. trouble. The law makes it the duty Eq. 152; 2 Atl. 286. of litigants to be diligenit and vigi- 148 Wadsiworth vs. O'Donnell, 7 lant, but it has never been under- Ky. L. Rep. 837; HoUoway vs. Hal- stood that a successful litigftnt was loway, 103 Mo. 274; 16 S. W. 536; entitled, as against his adversary, Wood vs. State, 66 Md. 6l ; Rice vs. to compensation for the time and Cook, 92 Cal. 144; 28 Pae. 219; attention which it was necessary for Hutchins vs. Munn, 20'9 U. S. 246. Mm to bestow upon the litigation." 149 Edwards vs. Edwards, 31 111. See also Riggs vs. Bell, 42 La. 474 ; Silsbe vs. Luca-s, 53 111. 479 ; Ann. 666 ; 7 South. 787 ; Curtiss vs. Rutherford vs. Moore, 24 Ind. 311. Bachman, 110 Cal. 433; 42 Pac. 9ilO; iBo Cook vs. Chapman, 41 N. J. Bartram vs. Oliio & Big Siandy E. Eq. 152; 2 Atl. 286, Van Fleet, V. R. Co., 141 Ky. 100; 132 S. W. 188; C: "There is such a, thing known Edwards vs. Bodine, 11 Paige (N- to the law as damage without in- Y. ) 223. jury, and this occurs where damage Contra — Helmkampf vs. Wood, results from an act or omission So Mo. App. 227. which the law does not esteem an » JUDICIAL BONDS. 348a disbursemeats in the matter of obtaining a judicial determina- tion that the injunction should not have been granted.^"^. But the expenses incurred in an unsuccessful attempt to dissolve an injunction are not recoverable on the bond even though on final hearing the injunction is vacated.^''- Attorney fees expended in procuring a dissolution of an in- junction are recoverable as damages on the bond."' Counsel fees for dissolution of an injunction are not allowed in the Fed- 151 Ten. Eyck vs. Sayer, 76 Hun 37; 27 N. Y. S. 588; Bartram vs. OHo & Big Sandy R. R. Co., 141 Ky. 100; 132 S. W. 188. Contra — ^Midgett vs. Vann, 158 N. C. 128; 73 S. E. 801. But see State vs. Graham, 69 S. E. 301; 68 W. Va. 1. Alliance Tnjst Co. vs. Stewunt, 115 Mo. 236; 21 S. W. 793. In this case the expenses of taking deposi- tions in another State were allowed as damages upon the bond. In Crounse vs. Syracuse C. & N. Y. R. R. Co., 32 Hun 497, the ex- penses of hiring a speoi'al train to take counsel to the place where the court was in sessiooi in order to obtain a dissolution of the injunc- tion, was considered a proper item of damages, where large property interests were involved, which were put in peril by the injunction. i52Curtiss vs. Bachman, 110 Gal. 433; 42 Pac. 910; Allen vs. Brown, 5 Lans. (N. Y.) 511; Lyon vs. Her- sey, 32 Hun 253. Affirmed 100 N. Y. 641; 3 N. E. 797. But see State vs. Graham, 69 S. E. 301; 68 W. Va. 1. 153 Bustamente vs. Stewart, 55 Cal. 115; Belmont Min. & Mil. Co. vs. Costigan, 21 Col. '!6,'): 42 Pac. 650; Thomas vs. McDaneld, 77 Iowa 299; 42 N. W. 301; Colby vs. Me- servey, 85 Iowa 5'5'5; 52 X. W. 499; Neiser vs. Thomas, 46 Mo. App. 47; Binford vs. Grimes, 26 Ind. App. 481; 59 N. E. 1085; Bush vs. Kirk- bride, 30 Sou. R«p. (Ala.) 780; Ximoeks vs. Welles, 42 Kan. 39; 21 Pac. 787; Cook vs. Chapman, 41 X. J. Eq. 152 ; 2 Atl. 286 ; City of Hel- ena vs. Brule, 15 Mont. 429; 39 Pac. 456, 852; New N.at. Turnpike Co. vs. Dulaney, 86 Ky. 516; 6 S. W. 590; Weierhauser vs. Cole, 109 N. W. 301; 132 la. 14. CoiTtra — Oliphint- vs. Mansfield, 36 Ark. 191; Sensenig vs. Parry, 113 Pa. 115; 5 Atl. 11; Jones vs. Rosedale St. Ry., 75 Tex. 382; 12 S. W. 998; Reivell vs. Smith, 106 Pac. 863; 25 Okl. 508; Jones vs. Rountree, 74 S. E. 1096; 11 Ga. App. 18il ; Stringfield vs. Hirseh, 94 Tenn. 425; 29 S. W. 609; Midgett vs. Vann, 158 N". C. 128; 73 S. E. 801. In Kentucky it is held tliat when the injunction is the only relief sought, and in fact gives the relief if sustained, no recovery for coun- sel fees can he had. Tyler vs. Hani- ilton, 108 Ky. 120; 55 S. W. 920. Contra — Seese vs. Northway, 58 Towa 187: I'i X. W. 2.58; State vs. Taylor, 68 S. E. 379; 67 W. Va. 3486 THE LAW OF SURETYSHIP. eral Courts,^"* althougn recovery can be had in a State Court upon a bond filed in a Federal action.^"' It is held that attor- ney fees contracted for, but not actually paid, can be recov- ered."" Where the injunction is merely incidental to some other re- lief sought, and the injunction is dissolved as a part of the final disposition of the case, no recovery for attorney fees can be had on the bond.^" Where the motion to dissolve is unsuccessful, attorney fees incurred in the preparation and hearing of such motion, can not 585; Chicago A. & N. R. R. Co. vs. Whitney, 121 N. W. 1043; 14'3 la. 506. 1B4 "There is no fixed standard by w'hich the honorarium can be meas- . ured. Some counsel demand much more than others. More counsel may be employed than are neces- sary. 'Wlien both client and coun- sel know that the fees are to be paid by the other party, there is danger of abuse. A reference to a, noaster, or an issue to a jury, might be nec- essary to ascertain the proper amount, and this grafted litigation might possibly be more animated and protracted than that in the origina,l cause." Oelrichs vs. Spain, 15 Wall. 211. 135 Mitchell vs. Hawley, 79 Oal. 301; 21 Pac. 833; Hannibal & St. J. E. E. Oo. vs. Shepley, 1 Mo. App. 254; Wash vs. Lackland, 8 Mo. Apip. 122; Aiken vs. Leathers, 37 La. Ann. 482. Contra — Tullock vs. Mulvane, 184 U. S. 497. Recovery of attorneys' fees in dissolving an injunction was al- lowed by the Supreme Court of Kansas against a boiid filed in a Federal Court for the District of Kainsas. In reiversing the judgment the Supreme Court of the United States held that "'a bond given in pursuance of a law of the' United States is governed, as to its con- struction, not by the local law of a ■ particular State, but by the prin- ciples of law as determined by this court and operating throughout the courts of the United States." 150 Holthaus vs. Hart, 9 Mo. App. 1; Grouse vs. Syracuse C. & N. Y. R. R. Co., 32 Hun 497: Wittich vs. O'Neal, 22 Fl'a. 592; Underhill vs. Spencer, 25 Kan. 71; Mcaux vs. Pittman, 35 La. Ann. 360; Garrett vs. Logan, 19 Aia. 344; Laiwiley vs. Nietert, 78 Iowa 758; 42 N. W. 635; Noble vs. Arnold, 23 0. S. 264; Littleton vs. Burgess, 91 P. 832; !« Wyo. 58. Contra — ^Willson vs. MoEvoy, 25 Oal. 169; Hooper vs. Patterson, 32 Pac. Rep. (Cal.) 514. In Schening vs. C5ofer, 97 Ala. 726; 12 South. 414, it was slhown that the services of counsel were rendered gratuitously, and it was held that no recovery for such serv- ices could be had on the bond. 157 Langworthy vs. McKclvey, 26 Iowa 48 ; Ady vs. Freeman, 90 Iowa 402; 57 N. W. 879; Boiling vs. Taite, 65 Ala. 417; San Diego Water Co. JUDICIAL BONDS. 34d be recovered, although the injunction is finally dismissed.^" Attorney fees in modifying an order of injunction can not be recovered on the bond.^"" The court will consider only the necessary counsel fees, and where several counsel are employed, no recovery can be had, except for such sum, and for such a number of counsel as seems to be reasonably necessary in resisting the injunetion.^^" A municipality defending by its attorney, vpho is paid an annual salary, is not entitled to counsel fees by v^ay of dam- ages on the dissolution of the injunction. But where the city employs an associate counsel to assist its city attorney in the dissolution of the injunction, such associate counsel's fees may be recovered as damages under the bond.'*'"' Where no motion is made to dissolve the injunction until the final hearing of the ease on its merits, and the injunction is then dissolved, no recovery can be had for counsel fees."^ vs. Pac. Coaat S. S. Co., 101 Cail. 216; 35 Pac. 651; Brown vs. Bald- win, 121 Mo. 126; 25 S. W. 863; Noble vs. Arnold, 23 0. S. 264; Ldv- ingatqn vs. Exum,-19 S. C. 223; Lamb vs. Sbaw, 43 Minn. 507; 45 N. W. 1134; Tabor vs. Clark, IS Col. 434; 25 Pac. 181; Chicago, A. & N. E. R. Co. vs. Whitney, 121 N. W. 1043; 143 la. 506. It is held in Kentucky that where the purpose cf the suit is to obtain a, perpetual injunction, and tlie de- fendant secures a dissolution on motion of the temporary injunction, counsel fees touching the matter of motion for dissolution are not re- coverable. Bemiis vs. Spalding, 9 Ky. L. Rep. 764 ; Barber vs. Edelin, 9 Ky. L. Eep. 971. 1=8 Curtiss vs. Baehman, 1 10 Cal. 433; 42 Pac. 910; Cunningham vs. Finch, 88 N. W. (Neb.) 168. In Wallace vs. York, 45 Iowa 81, the defendant's counsel in the in- junction prooeelding prepared and filed a motion to dissolve, and itihe necessary affidavits to sustain it, but did not press the matter of dis- solution, and the injunctioai was dissolved at the final hearing, and, the services of counsel in the mat- ter of tlie motion to dissolve were considered to be a proper element of damages. 159 Ford vs. Loomis, 62 Iowa 586 ; 16 N. W. 193; 17 N. W. 910. But see London & Brazilian Bank vs. Wallker, 74 Hun 395; 26 N. Y. S. 844. ICO Neiser vs. Thom,as, 46 Mo. App. 47 ; Citizens Trust & Guaranty Co. vs. Ohio Valley Tie Co., 128 S. W. 3T7; 138 Ky. 421. 160O Nixon vs. Biloxi, 76 Miss. 810; 25 So. 664; Vicksburg Waiter- works vs. Mayor of Vioksburg, 54 So. 852; 99 Miss. 132. 161 Donahue vs. Johnson, 9 Wash. 187; 37 Pac. 322; Whiteside vis. 350 THE LAW OF SURETYSHIP. Services rendered by counsel in resisting the allowance of an injunction are not recoverable as damages, as siicli charges are incurred before the injunction is issued, and so are not the result of it.^^^ Where the injunction has been dissolved on motion and the case dismissed and the plaintiff appealed, it was held that fees for services in the Appellate Court in a successful endeavor to sustain the judgment of the lower court were properly allow- able in an action on the bond.^'^" §198. Attachment bonds. The statutory remedy of attachment gives rise to three classes of bonds. (1) Bonds to procure an attachment wherein the plaintiff obligates himself with sureties to pay to the defendant such damages as he suffers in consequence of the attachment if it is finally determined that the writ is wrongful and should not have been allowed. (2) Bonds to release the property seized and restore it to the defendant, wherein the defendant obligates himself with Noyac Cottage Assoc., 84 Hun 555; a dissolution of the temporary in- 32 N. Y. S. 724; Anderson va. An- junction, but also in resisting the derson, 55 Mo. App. 268; State vs. issuing of » permanent injunction. Nash, 79 S. E. 829 ; Callins vs. Huff- "The two injunctions must be re- man, 93 P. 220; 4S Wash. 184; Bur- garded, not as independent of each nett vs. Stark, 136 N. W. 670; 155 other, but as connected parts of one N. W. 588. plan for securing relief; viritually, 162 Randall vs. Carpenter, 88 N. a, continuance of the preliminary Y. 293; Curtiss vs. Bachman, 110 injunction was sought, and the de- Cal. 433; 42 Pac. 910. fendants are entitled to their ex- See also Youngs vs. McDonald, 67 penses in successfully opposing it." N. Y. S. 375. A distinction la made Sargent vs. St. Mary's Orphan Boys' where, in addition to a prayer for a Asylum, 190 X. Y. 394; 83 jST. E. temporary restraining order, there 38; Perlman vs. Bernstein, 93 App. is a, request for an order on the Div. 335. defendant to show cause why an if^" Miller vs. Donovan, 13 Idaho injunction Should not be miade per- 735; 92 Pac. 991. manent. It has been held that the Contra — C. H. Albers Commission bond g'iven for the temporary in- Co. vs. Spencer, 139 S. W. 321; 23'6 junction is liable for attorney's fees Mo. 608 ; Ellwood Mfg. Co. vs. Ran- for services not only in procuring kin, 70 Iowa 403; 30 N. W. 677. JUDICIAL BONDS. 351 sureties either to pay the plaintiff's claim, if he finally obtain judgment, or return the property taken in attachment to- be ap- plied by the plaintiff on his judgment. This bond does not affect the attachment, which still subsists, but relates wholly to the possession and custody of the property pending a final hear- ' ing."= (3) Bonds to discharge the attachment wherein the defend- ant agrees to pay such judgment as the plaintiff may fijially re- cover in the action, which bond is substituted for the property and is a final disposition of the attachment. There is considerable uniformity in this country in the statr utory provisions authorizing attachment bonds. For the most part they have the same general effect and give rise to similaj obligations upon the sureties. The most common condition in bonds to procure attachments is that the plaintiff will pay the defendant all damages which he may sustain by reason of the attachment if the order is wrong- fully obtained. In Alabama the condition is that the obligor will respond to " such damages as he may sustain from the wrongful or vexa- tious suing out of the attachment." In Indiana " all damages which may be sustained by the de- fendant, if the proceedings of the plaintiff shall be wrongful and oippressive." In Maryland " all damages which shall be recovered against the plaintiff for wrongfully suing out such attachment." These slight differences in phraseology have given rise to some discussion as to whether the " vexatious " and " oppressive " character of an attachment involves a liability on the bond, in certain cases, for the common law action for malicious prosecu- tion, and limits the recovery to those cases in which malice is shown. *°* And also whether under the limitations of certain 1*' The form of forthcoming bond answer the judgment of the court in provided for in many States, and the action. which best preserv-ss the rights of i"* Wilson vs. Outlaw, Minor's both parties to the action, is that Rep. 367. " It was obvious that the the property or its appraised value taking and detention of his proper- m money shall be forthcoming to ty might be ruinous to the owner. 352 THE XAW OF SURETYSHIP. statutes, the defendant in attachment may have an action on the bond without first recovering or being " awarded " damages against the plaintiff.^°^ The main purpose of the courts, however, in the interpretation of the provisions being to construe the undertaking with as much strictness as the rights of the parties will permit, and not to de- part from the literal meaning of the terms where it can be avoided. The preponderance of authority is that malice need not be shown as a basis of recovery, and that the damages need not be first adjudicated against the principal. §199. Attachment bonds not forfeited for irregularities of exe- cution or defects in form. The statute prescribes the conditions and requirements for bonds in attachment proceedings, but these terms are for the pro- tection of the defendant and the plaintiff and his sureties who have had the benefit of the extraordinary remedy of a seizure of although there was no sort of malice or corrupt motive in the party at whose suit it might be attached. Why should the condition prescribed for the bond be ' to pay all damages sustained by the wrongful or vexa- tious suing out' if it had been the intention of the Legislature that no daihages should be recovered unless for malicious suing out? If such had been their intention, would not the term malicious readily have oc- curred, and been used instead of those employed ? A verbal criticism can hardly be necessary to prove that the party whose property is attached may find the proceeding wrongful and vexatious, that the su- jing it out may be ruinous to his credit and circumstances, although obtained without the least malice toward him If the plaintiff, under colour of such process, do, or procure to be done, what the law has not authorized, and the defend- ant is thereby injured, it seems clear, that he is in such case, as much as in any other, entitled to redress from the party whose illegal or ' wrongful ' act has occasioned the injury, although it may have been done without malice." 16B In Tennessee, where the statu- tory condition is to pay " all dam- ages which shall be recovered against the plaintiff in any suit which may be brought against him, for wrongfully suing out the at- tachment," it was held that a dis- tinct action need not first be brought against the principal. Smith vs. Eakin, 2 Sneed (Tenn.) 456. But the opposite view was taken in Georgia, Maryland and Mississip- pi under a similar statute. Sledge vs. Lee, 19 Ga. 411; McLuckie va. Williams, 68 Md. 262; 12 Atl. 1; Holcomb vs. Foxworth, 34 Miss. 265. JUDICIAI. BONDS. 353 the defendant's property in advance of a judicial determination that the defendant is indebted to the plaintiff, are estopped from claiming immunity from the consequences on account of the de- fects in their own proceedings. While the statute limits the right to have attachment to cases in which a bond is executed before the writ issues, yet if the bond is not given until ^ter the attachment is levied, it will be bind- ing on the sureties."* And where the.form prescribed by the statute is not followed, the bond is nevertheless binding.^*'' So a mistake in the recitals of the bond, as where the wrong court is named in which the action is pending,^** or where the penalty is in excess of the requirement of the statute,^"" or where the bond does not contain the requisite number of sure- ties "° or the sureties have not the statutory property qualifica- tions."' But where the court acquires no jurisdiction of the proceeding in attachment by reason of defects in the affidavit upon which it was issued, the sureties are not estopped from setting up such defense."^ §200. Whether damages for malicious prosecution are recover- able upon bond to procure attachment. While it is conceded generally that recovery can be had upon a bond to procure attachment vvithout alleging and proving malice, it is somewhat mooted whether the common law remedy of trespass on the case for malicious abuse of the process of the court can be prosecuted against the sureties upon the bond, or iseignmpter vs. Wilson, 1 Ind. iTOWard vs. Whitney, 8 N. Y. 144. 442. leJiSheppard va. Collins, 12 Iowa I'lGibbs vs. Johnson, 63 Mieh. 570; Wright vs. Keyes, 103 Pa. 567; 671; 30 N. W. 343. Eobertaon & Govanee Contracting 172 Murphy vs. Montandon, 3 Co. vs. Aetna Accident & L. Co., 91 Idaho 325; 29 Pac. 851. Conn. 129, 99 Atl. 557. See also Zechman vs. Haak, 85 168 Ripley vg. Gear, 58 Iowa 460; Wis. 656; 56 N. W. 158; Cadwell 12 N. VP. 480. vs. Colgate, 7 Barb. 253. issHibbs vs. Blair, 14 Pa. 413. 354 THE LAW Ol-' SURETYSHIP. whether the defendant is limited to his costs and expenses in dis- solving the attachment, the injury to his property, and the loss incident to its detention. It was held in Tennessee and in several other States that a recovery could be had on the bond both for the statutory penalty and the common law penalty for malicious prosecution.^^' It is held, however, that the malice of an agent in suing out an at- tachment will not render the principal liable on the bond for exemplary damages.^^* The Kentucky Court of Appeals in an elaborate and forcible argument maintains the view that to impose a liability on the bond sufficient to embrace every injury, both direct and indirect, that the defendant might sustain, would render the remedy by attachment impracticable, and defeat in a great measure the object of tlie statute, because of the difficulty in executing the necessary bond."" "3 Smith vs. Eakin, 2 Sneed (Temii.) 456; Eenkert vs. Elliott, 79 Tenn. 235. The same rule is applied in Texas. Wallaxie vs. Finberg, 46 Tex. 26; Mayer vs. Duke, 73 Tex. 445; 10 S. W. 565; Moore vs. Wit- tenbeig, 1'3 I/a. Ann. 22. See also Seattle Crockery Co. vs. Haley, 6 Wash. 302; 33 Pac. 650; Baldwin vs. Walker, 94 Ala. .514; 10 South. 391. i7iTynburg vs. Cohen, 67 Tex. 220; 2 S. W. 734; Baldwin vs. Walker, 94 Ala. 514; 10 South. 391; Seattle Crockery Co. vs. Haley, 6 Wash. 302; 33 Pac. 650. 175 Pettit vs. Mercer, 8 B. Mon. (Ky.) 51. "The extent to which the plaintiff has a right to recover in a. suit of this kind, or in other words, his right to damages com- mensurate to the injuries sustained by him in consequence of the ex- traordinary proceeding by attach- ment, forms the chief subject of in- quiry in this case. Has he a right to show that his credit has been seriously affected, his sensibilities wounded, and his business opera- tions materially deranged, in conse- quence of the attachment having been sued out; and to rely upon these matters to enhance the amount of damages? Or is he to be confined to the costs and expenses incurred by him, and such damages as he may have sustained by a deprivation of the use of his property, or any injury thereto, or loss or destruc- tion thereof, by the act of the pljiin- tiff in suing out the attachment? .... If an order has been obtained without just cause, and an attach- ment has been issued, and acted on in pursuance of the order, the terms of the bond secure to the defendant in the attachment all costs and dam- ages that he has sustained in conse- quence thereof. The condition of the bond is satisfied, and its terms substantially complied with by se- curing to him damages adequate to JUDICIAL BONDS. 355 §201. Forthcoming or redelivery bonds. A forthcoming bond is either executed directly to the plain- tiff in the action, or to the officer holding the writ for the benefit of the plaintiff, and provides for the return of the prop- erty in case judgment is awarded the plaintiff, or in default of a return of the property, to pay the plaintiff's judgment, or in some jurisdictions to pay the appraised value of the property to apply on the plaintiff's judgment."" Such bond does not affect the attachment itself,'^"" and pro- ceedings may thereafter be maintained to dissolve the attach- ment, and action for wrongful attachment instituted the same as if the forthcoming bond had not been given. The execution of the agreement to return the property in ease the plaintiff recovers a judgment, is not an admission that the attachment was rightfully obtained, and is only binding upon the obligors in case the attachment is still subsisting at the time the judg- ment is entered.^'' Although the bond for release of the attached property is not in the form required by statute, it will be binding on the surety if the property is in fact released, such as where the only con- dition of the bond is to pay whatever judgment is obtained against the plaintiff, whereas the statute provides for a re- delivery bond in the usual form.^'* the injury to the property attached, M. Co. vs. U. S. F. & G. Co., 3'5 aiili the loss arising from the depri- Mont. 23; 88 Pac. 565; Floyd vs. vation of its use, together with the Anderson, 128i P. 24fl ; 5 Okl. Cr. 65. actual costs and expenses incurred. i^o In Ohio, the redelivery Stat- It cannot be rationally presumed ute provides "The sheriff shall de- that the Legislature desigmed to liver the property attached to the impose on the security in the tond person in whose possession it was a more extensive liability. The stat- founld, upon the execution by such ute is remedial in its character, and person, in the presence of the sher- Should be expounded so as to ad- iff, of an undertaking to the plain- vance the object contemplated. To tiff, "wiith sufficient surety, resident impose an almost unlimited liability in the county, to the effect that the on the security in the bond, suffi- parties to the same are bound, in cient to embrace every possible in- double the appraised value of the jury that the defendant might sus- property, that the property or its tain, would be in effect, to defeat in appraised value in money, shall be a great measure, the object of the forthcoming to answer the judgment statute, by rendering it difficult, if of the court in the action." K. S. not impracticable, for the plaintiff 0., Sec. 5529. to execute the necessary bond." i^^" Schunack vs. Art Metal Nov- Blakeley's Trustee vs. Bogard, M3 elty Co., 84 Conn. 331 ; 80 Atl. 290. Ky. 377 ; 13fi S. W. 616. "7 Alexander vs. Jacoby, 23 0. 8. See also McClendon vs. Wells, 20 3S8. S. C. 514; Commonwealth vs. Ma^- its Schunack vs. Art Metal Nov- nolia Villa Land Co., 163 Pa. 99: elty Co., 84 Conn. 331; 80 Atl. 290; 29 Atl. 793; Elder vs. Kutner, 97 Wright vs. Keyes, 103 Pa. 567. Cal. 490; 32 Pac. 563; Plymouth G. 356 THE LAW OF SURETYSHIP. So also, where the statute provides for a release of a,ttaehed property on the giving of a bond but requires an order of court as a preliminary condition, the failure to secure the order of court will not invalidate the bond."" No recovery can be had on a forthcoming bond unless the property is actually delivered to the defendant in accordance with the terms of the bond. Thus where the sheriff immediate- ly seizes the property released under another attachment,'*" or retains the property because of the insufiSciency of the sure- ties."' Where by mistake the bond was written conditioned for the dissolution of the attachment, although intended as a forth- coming bond and the property released to the defendant, it was held that no recovery could be had on the bond, since the at- tachment was not in fact dissolved."^ A redelivery bond in attachment, conditioned to redeliver to the sheriff all of the property attached or pay the value thereof, is not satisfied by tendering to the sheriff a portion of the property, and offering to pay the value of the remainder, and this, though the remainder has been sold because perish- able."^'' A redelivery bond, fixing the value of the property attached, is conclusive on the sureties in an action to recover the pen- alty, and they cannot show a different value. "^' A judicial sale following the sustaining of the attachment is conclusive on the parties to the redelivery bond as to the value of the property.'*^" §202. Bonds to discharge attachment. A bond to dissolve or discharge an attachment is a final disposition of the attachment proceeding and is a substitution of the security of the bond for the lien acquired on the prop- erty. A motion to dissolve the attachment is no longer neces- sary after the filing of such bond and if such motion is pending, the bond operates to dismiss it, since the attachment being 179 Sullivan vs. Williams, 43 S. C. i82,. \V. 280. to substitute new or different par- 204 Bennett vs. Southern Bank, ties, or to state a new and inde- 61 Mo. App. 297; Vurpillat vs. pendent cause of action, the sureties Zehner, 2 Ind. App. 397; 28 N. W. in the attachment bond are bound 556. by the judgment against the princi- 20B Fusz vs. Trager, 39 La. Ann. pal. Turner vs. Fidelity & Deposit 292 ; 1 South. 525 ; Jaynes vs. Piatt, Co. of Majyland, (Cal.) 200 Pac. 47 0. Si 262; 24 N. E. 262; Goebel 959, (1921). vs. Stevenson, 35 Mich. 172; Guth- Contra — Sloan vs. iLangert, 6 rie vs. Fisher, 2 Idaho 101; 6 Pac. Wash. 26; 32 Pac. 1015. Ill; Hoge vs. Norton, 22 Kan. 374; But see Seattle Crockery Co. vs. Jerman vs. Stewart, 12 Fed. Rep. Haley, 6 Wash. 302; 33 Pac. 650. 266; Huff vs. Hutchinson, 14 How- 206 McMillan vs. Dana, 18 Cal. ard 586. 339; Pierce vs. Whiting, 63 Cal. An amendment of the complaint, 538; Hobson vs. Hall, 14 S. W. not setting \ip a new cause of ac- (Ky-) 958. tion, but merely increasing tlie 207 Abbott vs. Williams, 15 amounts demanded for breach of Colo. 512; 25 Pac. 450. contract, does not discharge a surety 208 Klippel vs. Oppenstein, 8 company executing a bond to re- Colo. App. 187; 45 Pac. 224. lease an attachment where the obli- JUDICIAL BONDS. 363 S206. Exoneration of sureties in attachment proceedings. The defendant in attachment who executes a forthcoming bond is exonerated from liability by delivering up, or offering to deliver, the property seized under the writ, but it is not a suffi- cient compliance with this duty to merely tell the plaintiff or the officer where the property is.^°° The bond cannot be exonerated pro tanto by a delivery of a part of the attached property.^^" It is held that if the identical property is delivered, the bond is satisfied, even though the property has been damaged while in the custody of the obligor. °^^ If a subsequent bond to discharge the attachment is executed, the forthcoming bond is exonerated.^^^ Where there is an amendment to the attachment process, such as a discontinuance as to one party and a substitution of a new party, a prior bond to discharge the attachment is exonerated.'^' But such rule is not applied where a new party is added by amendment, without a discontinuance of the process against the parties originally served.^^* Amendments to the petition or declaration which do not change the, cause of action do not exonerate the prior bonds.'"^ An alteration of the date when the vrrit was returnable, with 209Chapline vs. Robertson, 44 2"Christal vs. Kelly, 88 N. Y. Ark. 202. 285. 210 Bland vs. Creager, 13 B. Mon. 215 Jayne's Ex. vs. Piatt, 47 0. S. (Ky.) 509; Metrovieh vs. Jovovich, 262; 24 N. B. 262; Kellogg vs. 58 Cal. 341. Kimball, 142 Mass. 124; 7 N. E. 211 Jones vs. Jones, 38 Mo. 429. 728. But see Schuyler vs. Sylvester, 28 See also Townsend Nat. Bank vs. N. J. L. 487; Bell vs. Western Riv- Jones, 151 Mass. 454; 24 N. E. 593. er Imp. Co., 60 Ky. 558. Where the amendment was as to 212 Dearborn vs. Richardson, 108 the amount claimed, and it was Mass. 565. held that while the bond was not 213 Tucker vs. White, 5 Allen liable for the increased damages 322; Richards vs. Storer, 114 Mass. claimed by the plaintiff, it was 101 ; Adams vs. Jacoway, 34 Ark. not thereby exonerated as to the 642. original amount claimed. 364 THE LAW OF SUEETYSHIP. the consent of the parties, but without the consent of the sureties, was deemed an exoneration of the bond as to the sureties. "^^ No recovery can be had upon a discharge bond if the judgment against the defendant is void. Thus where no summons was served upon the defendant, the judgment being void for want of service, no liability attaches to the sureties upon the bond."^' It is held that a reference of the case to arbitrators and a find- ing against the defendant is not such a variance from the condi- tions of the discharge bond as will release the sureties."" A judgment against one of several defendants and in favor of the others constitutes a breach of a bond to discharge an at- tachment, and the sureties cannot claim exoneration even though the condition of the bond is to pay any judgment that may be rendered against the " defendants." '^" §207. Attachment bonds are available in any court to which the case is taken on appeal. An attachment bond is available in any court to which the case goes by appeal or error proceedings, even though the condi- tions of the bond do not so provide.""" But where judgment was against the plaintiff, and the at- tachment dissolved, and the plaintiff appealed from the judg- ment, it was held that the adjudication dissolving the attach- ment was final, and unless specially appealed from, released the sureties notwithstanding the plaintiff obtained judgment upon his claim in the Appellate Court. ^"' Where the defendant appeals, and judgment is against him in the Appellate Court, tbe plaintiff may elect whether he will proceed against the sureties upon the attachment bond or the appeal bond.""" 216 Simeon vs. Cramm, 121 Mass. 220 Ball vs. Gardiner, 21 Weni^. 492. 270; Bennett vs. Brown, 20 N. Y. 2" Clark vs. Bryan, 16 Md. 171. 99; State vs. McGlotlilin, 61 Iowa See also Jewett vs. Crane, 35 312; 16 N. W. 137. Barb. 208. 221 Barton vs. Thompson, 66 Iowa 218 Seavey vs. Heckler, 132 Mass. 526 ; 24 N. W. 25. 203. 222 Chrisman vs. Rogers, 30 Ark. 219 Gilmore vs. Crowell, 67 Barb. 351. 62. JUDICIAL BONDS, 365 |208. Measure of damages in actions upon attachment bonds. The actual loss of the defendant in consequence of a wrongful attachment may be recovered on the bond. This may include the depreciation in the value of the property while in the hands of the officer/^' and the loss of the use of the property.''''* The expenses of the defendant in securing a dissolution of the attachment, such as the value of his own time,^^° or travel- ling expenses and hotel bills incurred in attending the hearing upon the attachment/^" are recoverable on the bond. It is held that recovery can be had as compensation for the annoyance and mortification to defendant by a wrongful and vexatious attachment. °^' Only those injuries which are the direct result of the vsrrong- ful attachment can be recovered. Speculative damage, however probable, will be excluded. ^^* Injury to the credit of the de- fendant in attachment is generally considered too remote a con- sequence, and not a proper element of damage. ^^'' zssFrankel vs. Stern, 44 Oal. 168; Hoge vs. Norton, 22 Kan. 374. In this case cattle were seized in at- tachment and the loss alleged was the failure to secure the natural and expected increase of weight, be- cause of the removal of the cattle by the sheriff to a new range where the feed and water were limited, and this was held to be a proper measure of damages. 22*Hurd va. Barnhart, 53 Ckl. 97; Boatwright va. Stewart, 37 Ark. 614; State vs. McKeon, 25 Mo. App. 667. 225Higgins va. Mansfield, 62 Ala. 267; Sanford vs. Willetts, 29 Kan. 647. Contra, — Smith vs. American Bonding Co., 76 S. E. 481 ; 160 N. C. 674. 226 Damron vs. Sweetser, 16 111. App. 339; State vs. Shobe, 23 Mo. App. 474. Contra — Smith va. American Bonding Co. 76 S. ll. 481; 160 N. C. 574. 227 Floyd vs. Hamilton, 33 Ala. 235; Byrne vs. Gardner, 33 La. Ann. 6. 228Higgins vs. Mansfield, 62 Ala. 20" Tn this case recovery was souglit for loss resulting from a de- moralization of plaintiff's workmen during his absence attending the ait- tachment suit. 229H:olliday vs. Cohen, 34 Ark. 707; Goodbar vs. Lindslcy, 51 Ark. 380; 8 S. W. 132. In this case the defendant suffered, great damages in consequence of numerous execu- tions, which were precipitated by the wrongful attachment, but the injury waa considered too remote for recovery on the bond. Oberne va. Gaylord, 13 111. Apip. 30; Camp- bell vs. Chamberlain, 10 Iowa 337; Bettit vs. Mercer, 8 B. Mon. (Ky.) 91 ; Seattle Crockery Co. vs. Haley, 6 Wash. 302; 33 Pac. 650; Sterling vs. Marine Bank, 120 Md. 3S6; 87 Atl. 697. But see State vs. Andrews, 39 W. Va. 35; 19 S. E. 385; Meyer va. Fa- gan, 34 Neb. 184; 51 N. W. 753; Northampton Nat. Bank vs. Wylie, 366 THE LAW OF SURETYSHIP. Where moneys due the defendant are tied up by garnish- ment, recovery may be had for interest on the fund while it is detained.^'" Where the property attached did not belong to the defend- ant, it was held that he was not entitled to recover his expenses incurred in the discharge of the attachment.^^^ Where the property is already incumbered with liens equal to its value, the sureties upon the forthcoming bond will only be liable for nominal damages for failure to deliver.^''^ Reasonable attorney fees paid in resisting the attachment may be recovered as damages.^^* Such fees must, however, be actually paid or contracted for before they become a subject of damages.^^* It is held that the giving of notes for counsel fees is sufiScient payment to justify a recovery.^^= Counsel fees incurred in the trial of the case on its merits are not recover- able on the bond, even though the result of the trial is a disso- lution of the attachment.^^' Counsel fees expended in defending a wrongful attachment are not recoverable where no property was actually at- tached.""- 52 Hun 146 ; 4 N. Y. S. 907 ; Marx vs. Leinkauff, 93 Ala. 453 ; 9 South. 818. 230 Fourth Nat. Bank vs. Mayer, 96 Ga. 728; 24 S. E. 4'53; Green Fruit Co. vs. Pate, 99 Ga. 60; 24 S. E. 455 ; Strong vs. Hasterlik, 146 111. App. 346. 231 Tebo vs. Betanoourt, 73 Miss. 868; 19 South. 833. 232 Hayman vs. Hallam, 79 Ky. 389. 233Traa)nall vs. McAfee, 60 Ky. 34; Marchand vs. York, 10 Ky. L. Eep. 777; Northrup vs. Garrett, IT Hun 497; Damron vs. Sweetser, 1'6 III. App. 339 ; State vs. MoKeon, 2'5 Mo. App. 667; Adam vs. Gomila, 37 La. Ann. 479; Byrne vs. Gard- ner, 33 La. Ann. 6 ; Green Fruit Co. vs. Pate, 99 Ga. 60; 24 S. E. 455; Swift vs. Plessner, 39 Mich. 178; Bash vs. Howald, 27 Okl. 462; 112 Pac. 1125. But counsel fees expended for prosecuting an action on the bond for damages for the issuing of a wrongful attachment are not recov- erable. Chisenhall vs. Hines, 100 S. W. 362. Contra — By statute in Iowa. Peters va. Suavely-Ashton, 122 N. W. 836; 144 la. 147. Contra — Heath vs. Lent, 1 Oal. 410; Commonwealth vs. Meyer, 170 Pa. 380; 32 Atl. 1044; Littleton vs. Frank, 70 Tenn. 300; Plumb to. Woodmansee, 34 Iowa 116. Attorney feci are not allowed as damages upon attachment bonds in the Federal Courts, where not con- trolled by state practice. Bucfci & Son Ijumber Co. vs. Fidelity k De- posit Co., 109 Fed. Rep. 393. Dis- senting opinion, Shelby, J. The balding of the majority of the Court allowing attorney fees was based upon a construction of the Florida Statute. 234iSchultz vs. Morrison, 60 Ky. 9'8; Riaymond vs. Greene, 12 Neb. 215; 10 N. W. 709. Contra — Plymouth Gold Mining Co. vs. U. S. F. & G. Co., 35 Mont. 23; 88 Pac. 565; Marks vs. Mass. Bonding & Ins. Co., 117 N. Y. S. 1019; Bash vs. Howald, 27 Okl. 462; Me Pac. 125. 235 State vs. Gage, 52 Mo. App. 464. 236 State vs. Heckart, 62 Mo, App. 427; Elwell va. Seattle Scan- dinavian Pish Co., 2 Alaska 617. But see Dothard vs. Sheid, 69 Ala. IBS; Wilson vs. Root, 4)3 Ind. 486. 236(1 State VB. Binney, 127 Mo. App. 710; 106 S. W. 1114. JUDICIAL BONDS, 367 Where jurisdiction of the defendant is obtained solely by the attachment, as where the property of a non-resident is seized, there would seem to be a special ground for allowing as damages counsel fees paid in defending principal action. ^^' §209. Keplevin bonds. An action in replevin is instituted for the purpose of taking forcible possession of personal property under a claim of owner- ship or right of possession adverse to the one having the custody and control of the property. The primary motive of the plaintiff in replevin is to recover the property in specie, and this is the most valuable object ob- tained by the writ. The possession of the property in specie is, however, as valuable a right to the defendant as to the plaintiff. And it is of the highest importance that the party who asserts claims upon personal property in the possession of another, and by forcible invasion, aided by the machinery of the law, seizes and takes it away, should be required to fully indemnify the de- fendant against the consequences, in case the action of the plain- tiff is adjudged wrongful. Accordingly wherever the action of replevin is in force the giving of a preliminary bond is jurisdictional, and the court has no authority to order the writ, or the officer to serve it, except upon the condition of the execution of a bond.'''* The imperative statutory requirement of a bond cannot be dispensed with even by a deposit of money in lieu of the bond.^*' 23'' Buckley vs. Van Diver, 70 that in case a plaiintiff in reptevin Miss. 622; 12 South. 905; Fixal vs. takes possession of property under Talbnan, IW N. Y. S. 639; Tyng a bond, defective either in form or vs. American Surety Co., 48 App. in respect, to the solvency of the Div. 240. sureties, that the Court may order Contra — Frost vs. Jordan, 37 the defects to be remedied, and en- Minn. 544; 36 N. W. 713. force the order by the imprisonment 238 Dowell vs. Eichardson, 10 Ind. of the plaintiff imtil the order ia 573; Garlin vs. Strickland, 27 Me. complied with. Stec. 5147. 443; Bent vs. Bent, 43 Vt. 42; 239 Oummings vs. Gann, 52 Pa. Graves vs. Sittig, 5 Wis. 219. 488. In Tennessee the Code provides 368 THE LAW OF SUEETYSHIP. §210. Conditions of bonds in replevin. A bond in replevin must contain at least three conditions in order to fully protect the rights of the defendant. (1) That the plaintiff will prosecute his action with dili- gence. (2) That the plaintiff will restore the property of the de- fendant, or pay its value in money, in case it is determined that the seizure was wrongful. (3) That the plaintiff will pay the defendant such damages as he suffers by the wrongful seizure and detention. These are the customary requirements of the statutes, but the bond will not be void even though the conditions imposed by statute are not incorporated in the undertaking.^*" The officer serving the writ is usually made the sole judge of the sufficiency of the bond, and may refuse to accept an un- dertaking which does not in all respects conform to the law, and is liable on his own bond for failure to require a statutory bond in replevin,''*^ and where such discretion is given by statute to the officer the court will not interfere to control the discretion. ^*^ A bond containing a penalty in a less sum than that required by law is not thereby defective.^*' Where the qualifications of the sureties are not such as the statute requires, the bond, al- though irregular, is not voidable. ^''^ §211. Bonds in replevin which are void. While replevin bonds under which the parties have seized the property will be liberally construed to avoid a forfeiture and will not be invalidated for mere nonconformity to the statute, yet if any essential element of a contractual relation is wanting the bond cannot be enforced, such as where the surety has not the capacity to contract. ^*° 2-10 Hieklin vs. Nebraska, etc., 242 Bulmer vs. Jenkins, .3 How. Bank, 8 Neb. 46.3; Fawkner vs. Ba- Pr. 11. den, 89 Ind. 587 ; Lambden vs. Con- 243 Freeman vs. Davis, 7 Mass. oway, 5 Harr. (Del.) 1. 200; 241 Hughes vs. Newsom, 86 N. C. 244 State vs. Dunn, 60 Mo. 64. 424 ; Hall vs. Monroe, 73 Me. 123. 245 Coverdale vs. Alexander, SB Ind. 503. JUDICIAL BONDS. 369 Also where the court has no jurisdiction over the subject I matter of the suit ^^^ or the law under which- the action is in- stituted has been repealed ^*' the bond is invalid. §212. What constitutes a breach of a replevin bond. A failure to prosecute an action in replevin without delay is a breach of the bond, where the delay is unusual and by the fault or procurement of the plaintiff.-*' A voluntary dismissal of the action is of course a direct vio- lation of the undertaking and renders the bond liable.^*" Even a dismissal by the court for want of jurisdiction to hear the cause, the writ being properly issued, is a breach of the bond.^^" "Where the action is abated without the fault of the plaintiff, as where the dismissal results by operation of law, by reason of the absence of the court at the time and place appointed for 240 Caffrey vs. Dudgeon, 38 Ind. 512. Contra — Fahnestoek vs. Giltam, 77 111. 637; Bierma vs. Columbia Typewriter Mfg. Co., 179 lad. App. 69. 217 Hicks vs. Mendenhall, 17 Minn. 47'5. It is held that the question of the unconstitutionality oi the lajw under which the writ was issued; cannot be raised in an action on the bond. Magruder vs. Marshall, 1 Blackford 333. 248 Humphrey vs. Taggart, 38 111. 228; Elliott vs. Black, 45 Mo. 372; Mills vs. Gleaaon, 21 Cal. 274 ; Berg- hoff vs. Heckwolf, 2G Mo. 511. 240 Wiseman vs. Lynn, 39 Ind. 250; McKey vs. Lauflin, 48 Kan. 581; 30 Pac. 16. It has been held that where the action is dismissed without preju- dice for want of prosecution on mo- tion of the defendant and no judg- ment for return or for damages is entered, the defendant thereby loses his right of action on the bond. Howard vs. Wyatt, 145 Ky. 424; 140 S. W. 655. Contra — Seaboard Air Line vs. Hewlett, 94 S. C. 478 ; 78 S. E. 329. 250 Pierce vs. King, 14 R. I. 611; Biddinger vs. Pratt, 50 0. S. 719; 35 N. E. 7i9S. Per Curia: "One of the sitipulations of the undertaking was that the plaintiff 'would dulj' pi-ose- eute the action,' and this means prosecute it to effect. This he failed to do. True, the action was dis- missed for want of jurisdiction in the justice to try it, and on the mo- tion of the defendant. But the plaintiff cannot be heard to com- plain of that because he elected to bring his action in that court, and used its process to obtain posses- sion of the property in dispute, which he still retained; neither can his sureties, because, by signing the undertaking they agreed to make good the default of the principal, and whatever liability attaches to him by reason of the obligation, must equally bind them. The de- fendant is not at fault. He was given the choice either to challenge the jurisdiction, or, by silence, con- sent to have his rights adjudicated by a court which was without juris- diction. He should not be preju- diced by this effort to vindicate his rights." Seaboard Air Line vs. Hewlett, 78 S. E. 329 ; 94 S. C. 478. 370 THE LAW OF SUBETTSHIP, trial,^" or because of the death of a party,^*" tihe condition as to diligent prosecution is not broken. If the action is dismissed by the court, even without a finding as to the title of the property because of some defect in the process or a failure of proof, it will constitute a breach of the bond.==' No action can be maintained on the bond until the ease is finally determined,^"* and if the case is taken into the Appellate Court the remedy on the bond must await the judgment of that court.^°° §213. Sureties upon replevin bonds are concluded by the final order in the replevin action. A judgment against the plaintiff either dismissing the action or finding the right of property in tjie defendant is conclusive against the sureties in an action upon the bond.^"" The same rule applies where the defendant gives a redelivery bond and is defeated in the action, his sureties are concluded by the judg- ment.^" 2B1 Pierce vs. Hardee, 1 Thomp. & Cook (N. Y.) 557; Flannigan vs. Erwin, I7'3i 10. App. 452. 262 Burkle vs. Luee, 1 N. Y. 163. 253 Wood vs. Coman, 56 Ala. 283; Smith vs. Whiting, 100 Mass. 122; Boom vs. St. Paul, etc., 33 Minn. 253; 22 N. W. 538; Elliott vs. Black, 45 Mo. 372; Waddell vs. Bradway, 84 Ind. 537; Little vs. Bliss, 55 Kan. 94; 39 Pac. 1025. 2B4 iScott vs. Elliott, 63 N. C. 215 ; Wright vs. Marvin, 59 Vt. 437; 9 Atl. 601. 266 Corn Exchange Bank vs. Blye, 102 N. Y. 305; 7 N. E. 49; McMil- lan vs. Baker, 20 Kan. 50. 256 Peck vs. Wilson, 22 III. 205; Mason' vs. Richards, 12 Iowa 73; Cantril vs. Babcock, 11 Colo. 143; 17 Pac. 296; Ernst Bros. vs. Hogue, 86 Ala. 502; 5 South. 738; Jacob- son vs. Metzgar, 43 Mich. 403 ; 5 N. W. 455; Bank vs. Martin, 81 Kan. 794; 106 Pac. 1056. The judgment, however, will not be enlarged by implication so as to include a finding which the court might have made but which was not actually entered, thus where the judgment was that the defendant was entitled to the property, but no order was made requiring the plain- tiff to return the property or as- sessing damages' in default of a re- turn. It was held that the sureties were not liable for the value of the property. "Under the letter of this bond, no judgment was ever entered that the property should be re- turned, and until that was done, there could be no liability on the part of the sureties." Munding vs. Michael, 10 0. C. C. 165. 257 Kennedy vs. Brown, 21 Kan. 171. The view that the judgment against the principal is conclusive on the sureties was tersely stated in Bierce vs. Waterhouse, 219 U. S. 320, wherein the court said: "The issue as to whether the value of the property redelivered to the defend- ants was greater than alleged in the plaintiff's affidavit and claimed in the original complaint, as well as whether the amendment of that complaint was such as to change the cause of action, were issues made and decided against the principal in the bond upon which the sureties wer« bound and cannot be relitigated, in the absence of fraud and collusion, by a surety when sued upon the bond." JUDICIAL BONDS. 371 A judgment entered by confession or by consent of the parties without the knowledge of the sureties is an adjudica- tion which binds the sureties,^"^ except where such confession of judgment is collusive and fraudulent. None of the matters necessarily adjudicated in the replevin action will be re-examined in the action on the bond.^^" The sureties will not be permitted to show that the property taken in replevin belonged to a stranger and not to either party to the action.^"" An action against the sureties on a redelivery bond in re- plevin may be maintained without the issuance of an execution on the judgment in replevin and without a demand for the return of the property.^^"" §214. Measure of damages in action upon replevin bond. The defendant in replevin is entitled to recover full com- pensation for his loss if it is finally determined that the writ Was wrongful. The issue in replevin is whether the plaintiff is entitled to keep the property which he has taken from the defendant, or is bound to return it with damages for the detention. If the defendant prevails on this issue the plaintiff is thereby ad- judged guilty of a violation of the defendant's rights and the mere restoration of the property, or its equivalent in money, in many cases will fall short in compensating the defendant for the wrong done to him by the interruption of his possession. If the detention has damaged his business by depriving him of the use of property necessary to the conduct of the business, the defendant may recover compensation for this loss. Where the damages for detention are assessed in the replevin action the amount of recovery on the bond is thereby fixed and determined. If no recovery is had in the replevin action, as where the case is dismissed without trial, the damages for unlawful de- tention must be assessed, if at all, in the action on the bond.^°* 258 Estey vs. Harmon, 40 Midh. ^^oa First State Bank vs. Martin, 645. SI Kan. 794; 106 Pac. 1066. 259 Denny vs. Reynolds, 24 Ind. 26i In Stevens vs. Tuite, 104 Mass. 248. 328, it vv'as heW that the damages 260 Smith vs. Lisher, 23 Ind. 500 ; for unlawful detention must be as- First State Bank vs. Martin, 81 sessed in the replevin action and not Kan. 794; 106 Pac. 1056. in the action on the bo.nd. Thia 372 JUDICIAL BONDS. In a suit on the bond, the plaintiff is entitled to recover the amount found in the replevin suit to have been the value of the property where and when it was taken, with interest thereon from the date of the finding in the replevin suit. It is not competent for the obligors in the bond to show that the prop- erty was of less value than the amount stated in the writ of replevin and the bond; but it is competent for the obligee to show that the value was greater. The finding in the replevin suit as to the value of the property where and when it was taken is competent and conclusive evidence, as against the obligors, lof such value.^^^ action was, however, fully tried on its merits, and a failure to secure an adjudication of damages, wliere opportunity was afforded, might well be deemed a waiver. Ames, J. (334) : "But the wrong to the original defendant (and pres- ent plaintiff) was more than the mere detention of the property and interruption of its use. It was more • injurious to_him than if he had been simply locked out of his place of business during the pendency of the suit. His complaint is, that his cloth printing establishment was wrongfully broken up; his steam engine, machinery, fixtures and ap- paratus taken down and carried away; and that returning the prop- erty or its equivalent in money will still leave him subject to the great expense, inconvenience and delay of the entire reconstruction of his works. It is manifest that the dam- ages actually awarded him do not cover all; the elements of damage which he was entitled to prove, and might have proved; and that the amount allowed him was for that reason inadequate as an indemnity for the wrong that he had sustained. The difficulty in the present plain- tiff's case lies in the fact that all these elements of claim are compre- hended under the general head of damages recoverable in the original action. The time to prove his dam- ages, and to have them assessed, in order to be included in the judg- ment, was when the replevin suit was before the court and on trial. At that stage of the case, and for that purpose, he certainly was an actor or plaintiff claiming compen- sation for the injury done him by the wrongful act of replevying the goods out of his hands. In contem- plation of law, his claim for com- pensation (independently of the re- turn of the goods, or their equiva- lent in money, as secured by the bond ) would be made up of, 1st, in- terest on the money value; 2lid, the general inconvenience and loss re- sulting from the interruption of hia possession; and 3rd, the expense, trouble and delay attending the op- eration of replacing everything and restoring the establishment to its original condition. This is an en- tire and indivisible cl^im. He can- not recover part of it in one action, and subsequently maintain another for the remainder." 262 Washington Ice Oo. vs. Web- siter, 125 U. S. 426; 8 S. CT. 947; Lindsey vs. Hewitt, 86 N. E. 446; 42 Ind. App. 573. It is held that the measure of damages is the value of the property at the time of the trial and not at the time it was replevied. Kirkendall vs. Hartsock, 58 Mo. App. 234; Gardner vs. Brown, 22 Nev. 156; 37 Pac. 240; Gray vs. Eobinson, 33 Pac. Eep. (Ariz.) 712. But see Linasey vs. Hewitt, supra, where the value is fixed as of the daAe of the judgment for its return. It is also held that the plaintiff in replevin is bound by the valuation puit upon the property in the bond. Cyclone Steam Snovrplow Co. vs. Vulcan Iron Works, 52 Fed. Eep. 920. The rule in this case was ap- plied, however, because the plaintiff in replevin had removed the prop- erty pending the trial, thus afford- JUDICIAL BONDS. 373 The costs of the replevin action, including attorney's fees in defending it, may be recovered upon the bond.^'^ Interest may be recovered from the date of judgment in re- plevin to the termination of the suit on the bond,^°* even though the interest increases the amount of recovery beyond the pen- alty named in the bond.^°° The affidavit of replevin is prima facie evidence of the value of the goods replevied.^"*" §215. Defenses in action on replevin bonds. The judgment in replevin being conclusive upon the sureties as to all matters necessary to be adjudicated in determining that action,^"' there remains a limited range of defenses in an action on the bond other than those which relate to the validity of the undertaking.^"' The sureties may avail themselves of the defense arising from a material alteration in the bond,^** or a dismissal of the re- plevin action with the consent of the defendant,^*' or where the judgment in replevin has been satisfied, or for some cause is no longer subsisting and in fofce,^'" or where there has been a ing no opportunity for ascertaining replevin suit, are not reeoiveraMe the value at the time of the trial, under a bond reciting "and pay all See also Kaufman vs. Seaboard costs and daimages that may be Air Line Ry. 73 S. E. 592; 10 Ga. awarded against him." Lake vs. App. 248. Hargis, 82 ICan. 711; 109 Pac. 670. But see Werner vs. Graley, 54 Contra — Trimble vs. Keer-Roun- Kan. 383; 38 Pac. 482. Holding tree Mer. Co., 56 Mo. App. 683; the measure of damages to be the Oarraway vs. Wallace, 17 Sou. Rep. value at the time and place the (Miss.) 930; Maguire vs. Pan- property was taken. American Amusement Co., 205 Mass. See also Bank vs. Hall, 107 Pa. 64; 91 N. E. 135. 583 ; Manning vs. Manning, 26 Kan. 264 Leighton vs. Brown, 98 Mass. 98. It is held that where the re- 516; Brainard vs. Jones, 18 N. Y. plevin action is tried on its merits 35. with an opportunity for assessing s's Wyman vs. Robinson, 73 Me. that a failure to make 384. such assessment will bar a recovery Contra — Eraser vs. Little, 13 on the bond. Morrison vs. Yancey, Mich. 198. 23 Mo. App. 670; Ihrig vs. Russell, ^issa Richardson vs. Gilbert, 135 122 P. 608; 68 Wash. 70. 111. App. 363. 263 Harts vs. Wendell, 26 111. App. See also Bierce vs. WaAerhouse, 274; Richardson vs. Gilbert, 136 111. 219 U. S. 320. App. 363; Moore vs. Beech Co., 266 Ante Sec. 230. 221 III. App. 609. =67 Ante Sec. 228. Kansas courts, distinguishing re- ^°^ Martin vs. Thomas, 24 How. plevin actions from those of attach- 31'6- ment and injunction, hold that in ^'° Casper vs. Kent Circuit Judge, the absence of malice, want of prob- 45 Mich. 251; 7 N. W. 816. able cause or bad faith on the part ^''° Blackburn vs. Crowder, 108 of the plaintiff, attorney's fees and , Ind. 238; 9 N. E. 108. expenses Incurred in defending the 374 THE LAW OF SUEETYSHIP. change of defendants by a substitution of a new party."^ These defenses, of course, are not peculiar to sureties on re- plevin bonds, but are such as apply to any form of bond given in the course of a judicial proceeding. It is held that while certain defenses can not be urged as a bar to an action on the bond, yet they may be pleaded in mitigation of damages, thus, where partnership assets were levied upon in execution by a creditor of an individual partner, and replevined by the co-partner, and the latter failed to maintain his action ; in a suit upon the bond, the defense was admitted in mitigation of damages, that the partnership was insolvent and that its affairs had not been wound up, and that the creditor's execution would therefore have availed him nothing. ^^^ So also, where the original action failed for some cause not involving the merits, such as a premature starting of the replev- in suit, these facts may be shown in mitigation of damages although not a bar to the action.^'^ Where the property taken in replevin increases in value dur- ing the detention by reason of the .addition of labor to the prop- erty, such increased value, if added in good faith, and the prop- erty returned, may be set off in mitigation of damages."^* It is no defense to an action on a replevin bond that the pwp- erty has. been destroyed by unavoidable casualty pending the final action, and that the plaintiff on that account can not re- 271 Vinton vs. Mansfield, 48 Conn. "2 Hacker vs. Johnson 66 Me 21. 474; Williams vs. St. L., I. M. & 6. "3 Davis vs. Harding, 3 Allen 3(^ Ry., 8 Mo. App. 13S. See also Hertz vs Kaufman, 46 ■In Union Trust Co. vs. Shoe- 111. App. 591. In IlUnow the stat- maker 101 N. E. 1050; 258 111. 564, ute provides that where the merits it is said- "A replevin bond is in. of the case were not determined m tended to indemnify the party ac- replevin, the defendants in an ac- tually interested at the time the tion upon the bond may plead tne judgment shall be recovered, against question of title the wrongful prosecution oi the sup- O'Donnell vs. 'Oolby, 15;3 111. 324, posed cafse of action, and the pos- 38 N. E. 1065. The dismissal of the sible exercise of the court's power replevin action for lack of jurisdic- of amendment and the substitution tion, while not a bar to an action on of parties are within the oontem- the bond, may be set up in mitiga- plation of the obligors when the tio" «* damages. Robinson -re. m- bond was executed." ter, 10 Ind. App 698 ; 38 N. E 222 , See also Hanna vs. International Klaproth vs. Greenberg, 147 111. Petroleum Co., 23 0. S. 622; Beco- App. 380; Bailey vs. Dennis, 1J5 vitz vs. Saperstein, 4« Ind. App. Mo. App 93; "^ f • W-.506. 339 ■ 92 N E 551 "* State vs. Shelvm-Carpenter Contra— First Ctnnmercial Bank Co., 62 Minn. 99; 64 N. W. 81. If vs Valentine, 209 N. y. 145 ; 102 the property is not returned and re- N E. 544. covery is had for the value^ the in- » JUDICIAL BONDS. 375 turn the property. ^"^ But when the return of the property is made impossible by reason of a subsequent seizure under a process of law the sureties upon a replevin bond are not liable.^^* §216. Bonds given in the course of the administration of estates of deceased persons. Executors, administrators or guardians might with some pro- priety be classified as public officers. They perform functions of a public character and give bond to the State for the benefit of all persons interested in the administration of their trust. Their duties, however, are performed as officers of the court, under the direct supervision of the court, and unlike public ofii- eers in general, they do not for themselves determine their own course of action in accordance with their own interpretation of the law, but at all times are guided by the decrees and orders of the court. Their position as ministerial officers of the court imposes special obligations which do not arise in the case of public offi- cers whose duties are fully prescribed by Statute. Public officers give bond to faithfully administer their office according to law. Judicial officers undertake to perform the duty pointed out by the Statutes, and also to obey the orders of the court. Suretyship as related to this branch of the public service not only involves the fidelity of one charged with the execution of a trust, but also the varying and uncertain contingencies arising in contested legal proceedings. §217. Duties for which executors and administrators are chargeable on their bonds. If the decedent by his last will and testament points out the way in which the estate is to be administered, it is the duty of the administrator to follow the plan thus laid down, and his oreaaed value by reason of the addi- 2''5 Suppigej vs. Gruaz, 13i7 111. tion of labor cannot be recovered. 216; 27 N. E. 22; Capen vs. Bart- Busch vs. Fisher, 89 Mich. 192; 50 lett, 153 Mass. 346; 26 N. E. 873. N. W. 788. "« Caldwell vs. Jans, 1 Mont. 570. 376 THE LAW OF STJEETYSHIP. bond is liable for his failure to so administer the estate. If he assumes to act upon his own interpretation of the meaning of the will or the provisions of the law applicable to decedent's estates, he does so at the peril of himself and his sureties, and however reasonable his course of action may be, and notwith- standing he acts with the utmost good faith, if he mistakes the law, he must abide the judgment of the court, and such judg- ment may be enforced by recourse upon his bond. Administration trusts in many cases are involuntary. This is nearly always so as far as the beneficiaries are concerned, and the care and custody of property by operation of the law regu- lating the settlement of estates is placed in the control of these officers without the consent of those to whom it belongs. The trustee must be held to the full measure of diligence and fidelity which a prudent man bestows upon his own affairs. An administrator can not justify for a failure to perform an order of the court or to observe the regulations of the statute. He is clothed vdth no discretion in this respect, and whether the order or the Statute is reasonable or not, and whether it sub- serves the interest of the estate or not, it is nevertheless a duty which by the terms of the bond must be observed. It is no justification that the officer was advised by his coun- sel to do the wrongful act, although the advice was given in good faith and was apparently sound."^' The administrator is chargeable for negligence and bad judg- ment in investing funds of the estate where he assumes to act without order of the court or special direction of the will,"" 277 Boiirne vs. Stevenson, 58 Me. create a liability on the bond. The 499. Court said : " The question of good 278 Johnston vs. Maples, 49 111. faith on the part of the administra- 101 ; Probate Judge vs. Mathes, 60 tor and his counsel in making the N. H. 433; Baer's Appeal, 127 Pa. deposit does not arise, because it 360- 18 Atl. 1. cannot change the result. No one The administrator deposited the can doubt that so far as they were trust funds in a bank, taking there- concerned the highest integrity and for a certificate of deposit at 4 per utmost good faith characterized the cent, interest payable in twelve transaction. It is simply an in- months, and the bank failed before stance of misplaced confidence, un- the expiration of the time, held to fortunate in its consequences, but JUDICIAL BONDS. 377 and the bond will be liable for the failure of the administrator to resist the allowance of unjust claims against the estate,^'" aa well as for his failure to pay claims which have been allowed, where suflBcient funds are in his hands for that purpose. A re- fusal to pay a claim under these circumstances is equivalent to a conversion of the funds to his own use.''^" So also, a failure by the administrator to pay over to an heir the amount of his distributive share is a breach of the bond, and the heir need not first exhaust the funds of the estate. "^^ The same liability arises for failure to pay the widow the amount allowed by the court.^'^ The failure by the administrator to properly observe the order of preference in the distribution of the assets, whereby the funds of the estate are exhausted, leaving unpaid claims enti- tled to preference, raises a liability against the bond.^*' Like- wise the payment in unequal proportions of claims in the same class creates a liability on the bond in favor of those creditors who do not receive their pro rata share. ^'* The neglect of an administrator to file his account for an unreasonable time has been held to be a constructive conversion of the assets shown in the inventory, for which the sureties upon the bond are chargeable.^^^ Where the administrator filed no inventory and made no which must nevertheless be disposed Shriver vs. Reister, 65 Md. 278 ; of according to the plain legal rules 4 Atl. 679 ; Ralston vs. Wood, 15 which govern all similar cases." 111. 159. a'o Smith vs. Cuyler, 78 Ga. 654; 282 Choate vs. Jacobs, 136 Mass. 3 S. E. 406 ; Gold vs. Bailey, 44 111. 297. 491. Contra — Rocco vs. Cicalla, 59 280 State vs. James, 82 Mo. 509 Pence vs. Makepeace, 75 Ind. 480 Thayer vs. Clark, 48 Barb. 243 Tenn. 508. 283 Worthy vs. Brewer, 93 N. C. 344; State vs. Brown, 80 Ind. 425. Brewester vs. Balch, 41 N. Y. Super. 28t Evans vs. Taylor, 60 Tex. 422. Ct. 63; Weber vs. North, 51 Iowa 285 Webb vs. Gross, 79 Me. 224; 9 375; 1 N. W. 652. Atl. 612; McKim vs. Bartlett, 129 But see Robinson vs. Hodge, 117 Mass. 226. Mass. 222. 281 Stanton vs. State, 82 Ind. 463 ; 378 THE LAW OF SUEETYgHIP. accounting of his trust, it was considered a breach for which action would lie on the bond.**" §218. The scope of the administration bond covers all assets and equities of the estate. The law requires the administrator to faithfully administer the estate, and the bond covers all the requirements of the law except when restricted by words of special limitation. The undertaking covers all the assets, whether they come into the hands of the officer before or after the execution of the bond.^*' Even though the conversion takes place before the execution of the bond the sureties will be liable. Thus, where sureties on motion were released from a bond and a new bond substituted, but the assets of the estate had been wasted before the execution of the last bond, it was held : " The discharge of this obligation required that the executor should administer the estate as required by the law and the will, or deliver it to his successor to be so administered, should he resign or be removed. The fact that prior to executing the bond he had converted the assets to his own use, in no way affected the obligation to ac- count for all that had been received by him belonging to the estate; and it was to secure this obligation that the bond was required and given." *** 286 Ellis vs. .Johnson, 83 Wis. 394; against the sureties is limited to 53- N. W. 691. money or property which actually By statute in Massajohusetts an, comes into the hands of the admin- administrator of an insol-vent estate istrator. Statements by the officer is required to make a representation in his reports to the court, charging of that fact to the Probate Court. himself with assets which he never Where such an administrator failed received, will not be conclusive of to file an inventory or account and the fact against the sureties. State permitted a creditor to obtain a vs. Elliott, 157 Mo. 609; 57 S. W. judgment which remained unsatis- 1087. ified, it was held to .be a breach of =S8 Foster, Admx., vs. Wise, the bond rendering the sureties Admr., 46 0. S. 26; 16 N. E. 687. liable to the full extent of the claim The surety against whom recovery of the creditor, notwithstanding the was had in this case subsequently deceased may have in fact left no brought a claim against the sureties estate. Mclntyre vs. Parker, 80 N. of the former bond which was in E. 798; 196 Mass. 155; Forbes vs. force at the time the devastavit oc- McHugh, 152 Mass. 412; 25 N. E. curred, and it was held that as be- 622. tween the different sets of sureties, 28' Choate vs. Arrington, 116 the entire burden should fill upon Mass. 552; Bellinger vs. Thompson, those who had executed the prior 26 Oregon 320; 37 Pac. 714; 40 Pac. bond. Corrigan vs. Foster, Admx., 229; State vs. James, 82 Mo. 1,09. 51 0. 8. 22.5. But see Parmele vs. Brashear, 16 See also Pinkstaff vs. The People, La. (0. S.) 72. The liability 59 111. 148. "Whether he had, in JUDICIAL BONDS. 379 The sureties upon the bond will be. liable for the conversion of funds collected by the administrator under color of his office, but which are not properly assets of the estate, and which he would not be bound to collect and distribute.^*" The general administration bond covers all the duties of the offlcer in reference to the land of the decedent. If he is charged by the will with the care and management of the real estate, or with the sale of it to pay debts or legacies, the sureties will be liable for misappropriation or maladministration, notwithstand- ing the Statute gives no authority to the officer touching the land.^"" If the executor or administrator is also a debtor of the es- tate, the amount of his debt at once becomes an asset in his hands, and he must account for it on his bond,^°^ although in some jurisdictions the rule prevails that the bond is not liable fact, used the trust funds or not, when thia (fche second) bond was given, they were, in the eye of the law then in his hands to be admin- istered, and the bond -was given as security that they should be so ad- ministered." In Scofield vb. Churdhall, 72 N. Y. 565, where the condition of the bond was "to faithfully execute the trust reposed in him as executor," it was held that the bond was to secure any imiproper use of the funds be- longing to the estate without regard to the time of its occurrence. Eli- zelde vs. Murphy, 163 Cal. 681; 126 Pac. 928. 289 In re Hobson, 61 Hun 504; 16 N. Y. S. 371; Wiseman vs. Swain, 114 S. W. 145.. But see Warfield vs. Brand, 76 Ky. 77; Orrick vs. Vahey, 49 Mo. 428; Pace ys. Pa-ce, 19 Fla. 438. The tendency of the later oases is toward relieving the surety from liability in those cases where the administrator has misappropriated funds whic'h are not strictly assets of the decedent's estate. The sure- ties guaranty the fidelity of the principal only in his representa;tive capacity, and not in his individual capacity. Probate Oourt vs. Wil- liams, 73 A. 382; 30 R. I. 144; Campbell vs. American Bonding Co., 55 So. 306 ; 172 Ala. 458 ; Peo- ple vs. Petrie, 191 111. 497; 61 K E. 499; Jester vs. Gustin, 168 Ind. 287; 63 N. E. 471; Salter vs. Suth- erland, 123 Mich. 225; 81 N. W. 1070. Even where a policy of life in- surance was m'ade payable to the "executors, administrators or as- signs," and the proceeds were paid over to the administrator; the sure- ties on his bond were held not liable for his failure to pay it over, since by law the proceeds of the policy were payable to the widow and chil- dren, and therefore were not a part of the estate of the "assured for which as adiministrator he was obliged to account. Bradford vs. Watson, 62 Bo. 484: 65 Ela. 461. See also People vs. Petrie, 61 N. E. 499; 191 111. 497. 290 Dix vs. Morris, 1 Mo. App. 93. But see White vs. Ditson, 140 Mass. 351; 4 N. E. 606. Where it is held that the sale of real estate without order of court but under the authority of the will, the sale not being necessary to pay debts, that the sureties were not liable for the conversion of the proceeds of the sale. See also Newport Probate Court vs. Hazard, 13 R. I. 3. 291 Winship vs. Bass, 12 Mass. 199 ; Wright vs. Lung, 66 Ala. 389 ; Lambrecht vs. State, 57 Md. 240; Kealhofer vs. Emmert, 79 Md. 248; 29 Atl. 68; McGaughey vs. Jacoby, 54 0. S. 487; 44 N. E. 231; Twitty vs. Houser, 7 S. C. 153; Arnold vs. Arnold, 124 Ala. ,550; 27 Sto. 465; Bassett vs. Fidelitv Co., 184 Mass. 210; 68 N. E. 205; Cfrow vs. Co- nart, 90 Mich. 247; 51 N. W. 450. In California the Statute (Code Civ. Proc, Sec. 1447) expressly pro- vides that debts due the te^ator by the executor shall be considenwi as 380 THE LAW OP SUKETYSHIP. if the administpator is insolvent, and that the sureties will be held to no greater responsibility for debts due from the officer than for debts due from third persons.^'^ ■ "Where a surety of a defaulting administrator was made his successor in office, the amount of his liability on the bond of the former administrator was considered an asset in his hands, for which his bond was holden.^"" Where it appeared that the surety was induced to sign the bond of an insolvent administrator as a part of a fraudulent . scheme to make him liable to the beneficiary of the state upon a debt owing by the administrator, the court declined to apply the rule.^°* The collection of rents accruing upon lands of the decedent is in the right of the heirs, and the collections do not become' assets in the hknds of the administrator, and the sureties are not liable for the failure of the officer to account for such rents.^"" The expenses of administration are not chargeable against the bond. Debts contracted by the administrator do not bind the estate, but the officer individually, and if unpaid do not con- stitute a breach of his trust.^''" It is held, however, that where the court has allowed attorney fees and entered an order for their payment that it becomes a charge against the estate, and a failure to comply with the order is a breach of the bond.^°' §219. Successive administration bonds are cumulative. All the bonds given during the continuance of the trust are cumulative.^"' Where the Statute provided that the giving of m^oney in his hands belonging to tihe the sureties were liable where ike estate, and in Treweek vs. Howard, administrator was able to pay his 105 Oal. 434; 39 Pac. 20, it was held debt, but was insolvent in that his that the sureties were liable for property was not subject to moneys eanbezzled from the testator process. while the executor was acting as his 293 Choate vs. Thorndike, 138 agent, of which the sureties had no Mass. 371. knowledge at the time of the txecu- ='>* Campbell vs. Johnson, 41 0. S. tion of the bond. 588. See also Sanchez vs. Foster, 65 295 State vs. Barret't, 121 Ind. 92 ; Pac. 1077; 133 Cal. 614. 22 N. E. 969; Smith vs. Bland, 46 2S2 Bauous vs. Barr, 45 Hun 582 ; Ky. 21; Hutcherson vs. Pigg, 8 alBrmed, 107 N. Y. 624; 1'3 N. E. Grat. 220; U. S. F. & G. Oo. vs. 939; Barker vs. Iriok, 10 N. J. Eq. Eussell, 141 Ky. 601; 133 S. W. 572. 269; Spurlock vs. Earles, 67 Tenn. Contra. — Dix vs. Morris, 66 Mo. 437; Lyon vs. Osgood, 58 Vt. 707; 7 514. Atl. 5; State vs. Gregory, 119 Ind. 298 Taylor vs. Mygatt, 26 Conn. 503; 22 N. E. 1; McCarty vs. Era- 184; Baker vs. Moor, 63 Me. 443; zer, 62 Mo. 263 ; State vs. Morrision, Carter vs. Young, 77 Tenn. 210. 244 Mo. 193 •- 148 S. W. 907 ; Mc- 29' State vs. Walsh, 67 Mo. App. Ewen vs. Fletcher, 146 N. W. 1. 348. In Gqy vs. Grant, 101 N. S. 206; 298 Piokens vs. Miller, 83 N. C. 8 S. E. 99 and 106, it was held that 543; Dugger vs. Wright, 51 Ark. JUDICIAL BONDS. 381 an additional bond shall discharge the sureties as to defaults eommitted after the filing of the new bond, it was held that the new bond was nevertheless cumulative and liable for the de- faults occurring before its execution.'''"' It is held that the giving of an additional bond required by Statute in a land sale proceeding for the purpose of paying debts, does not render the sureties of the second bond liable for any defaults outside of the funds resulting from the sale of the land.'""' A bond given upon a grant of ancillary administration is not cumulative with the bond given in the jurisdiction of the prin- cipal administration, and the sureties upon the former are not liable to a creditor who has proved his claim in the latter or principal jurisdiction.'"^ §220. As to whether judgment or order of court against the prin- cipal is necessary to a cause of action on the administra- tion bond. If the law makes it the duty of the officer to pay a legacy or a claim, and does not require an order of the court as a necessary step in the payment, an action may be had on the bond without an order of court directing payment. Thus, where the will directs the payment of a legacy it becomes the duty of the offi- cer to pay out the legacy, if there are sufficient funds, and an action may be maintained upon the bond without an order of court being made.'°^ So where no formal order is required to enable the adminis- 232; U S. W. 213; Lingle vs. Cook, 300 Salyers vs. Ross, 15 Ind. 130. 32 Grat. 262; Lane vs. "State, 24 But see Powell vs. Powell, 48 Cal. Ind. 421; Modawell vs. Hudson, 80 234. Ala. 265. In this case the admin- soi Probate Court vs. Brainard, istrator resigned and became his 48 Vt. 620. own successor with a new bond, soa Gould vs. Steyer, 75 Ind. 50. held — that the distributees may It is held that a residuary lega- charge either set of sureties at their tee cannot recover upon the admin- election, istration bond until the amount of See also Lacoste vs. Splivalo, 64 the residuum is adjudicated by the Cal. 35; 30 P^ 571; Central Bank- p.^bate Court and ordered paid. mg & Security Co. vs. U. S. F. & G. t t • ^„ i,«^- „^, Oo 80 S E 121 Jones vs. Irvine, 23 Miss. 361. 299 State vs. Beming, 74 Mo. 87. 382 THE LAW OF SUEETYSHIP. trator to make a final distribution to creditors, a failure to do so is a breach of the bond and action may be brought without first obtaining an order of distribution.'""' It is the duty of an administrator to pay over to his successor in ofiice the amount found due upon the final settlement of his accounts, and an action can be maintained upon his bond by the administrator de bonis non without the entry of an order of court requiring payment.'"* If the claim against the estate, whether that of a creditor or legatee, is in dispute or unliquidated, no action can be instituted on the bond for its recovery until the amount is first determined either by a judgment or an allowance by the administrator. The sureties are under no obligation to render an accounting, but only to pay the balance found due upon an accounting.'"'' A claim against the administrator for devastavit or malad- ministratioii is not chargeable upon the bond until reduced to a judgment against the officer.'"" If judgment has been entered against the administrator, it is not necessary to have execution on the same and a return of nulla bona before instituting action on the bond.'"' 303 Municipal Court of Proivi.lenfee Miss. 284 ; Weilie vs. Stalfham, 67 vs. Henry, 11 E. I. 563. Cal. 84; 7 Pac. 143; Tudheyse vs. But see Probaie Oourt vs. Kent, Potts, 91 Mich. 490-; 51 N. W. 1110; 49 Vt. 380. Hudson vs. Barratt, 62 Kan. 137; It has heen held that where an 61 Pac. 737; Pennington vs. New- estate of a deceased person is in man, 129 Pac. 603; 36 Old. 594. process of settlement in the Pro- 306 in some jurisdictions it is bate Court and there has been no provided by Statute that action refusal by the administrator to may be brought on the bond for make a final accounting, that an maladministration without a. prior action cannot be maintained on the judgment . of devastavit. bond until there has been an ac- Giles vs. Brown, Administrator, counting in the proper tribunal. 60 Ga. 658; iWliitfield vs. Evans, Hudson vs. Barratt, 62 Kas. 137; 56 Miss. 488; People vs. Admire, 61 Pac. 737. " 39 111. 251; Decker vs. Decker, 3 304 Balch vs. Hooper, 32 Minn. Alaska 121. 158; 20 N. W. 124; State vs. Por- 307 McCalla vs. Patterson, 57 Ky. ter, 9 Mo. 356; Fossbender vs. 201; Commonwealth vs. Dill, 1 American Surety Co., 122 N. Y. S. Phila. Eep. 556; Governor vs. 442; Tofler vs. Kesinger, 80 Kan. Chuteau, 1 Mo. 771; Hood vs. 549; 102 Pac. 1097. Hayward, 124 X. Y. 1; 26 N. E. 305 Judge of Probate vs. Couch, 331. 59 N. H. 39; Young vs. Duhme, 61 Contra — ^Seegar's Ex'rs vs. State, Ky. 239; Dinkins vs. Bailey, 23 5 Har. & J. (Md.) 488. JUDICIAL BONDS. 383 §221. The sureties upon the bond of an administrator are con- cluded by judgment against the principal. In the absence of mistake or fraud, a judgment by a court of competent jurisdiction against the principal is conclusive against the sureties upon his hond.'"^" If such judgment or decree arise in the settlement of the officer's accounts the amount so found due will be binding upon the sureties even though they were not parties to the settlement and had no notice of it.'"* Such judgment is also conclusive in favor of the sureties, and claimants are estopped from showing in an action on the bond that the amount due is in excess of the judgment against the principal.^"' A judgment fixing the amount of a legacy and ordering it paid is binding on the sureties in an action on the bond.'*" The sureties are not concluded from showing that the order or judgment against the principal was obtained by fraud and collusion on the part of the principal.'^' It is held that a judgment by confession 'against the admin- istrator is only prima facie evidence against his sureties.^^^ Where an administrator, in attempting to make a contract on behalf of the estate, has exceeded his authority, and has suffered a judgment to be rendered against him as a result of such transaction, the sureties will not be estopped to deny the validity of the judgment.'^^'' aoToShipman vs. Brovm, ISO Pac Illinois, 222 111. 325; 78 N. E. 609; 603; 36 Okl. 623. Briggs vs. Manning, 80 Ark. 304; sosGrimmet vs. Henderson, 66 97 iS. W. 289; Weyant vs. Utah Ala. 921; Martin vs. Tally, 72 Ala. Savings Trust Co., 54 Utah 181, 23; George v'a. Elms, 46 Ark. 260 Irwin vs. Backus, 26 Cal. 214 Nevitt vs. Woodburn, 160 111. 203 182 Pae. 189, 190 note. Contra — ^Lipscomb vs. Postell, 38 Miss. 476. 43 N. E. 3185 ; Clark vs. Fredenburg, 309 Crouch vs; Edwards, 52 Ark. 43 Mich. 263 ; 5 N. W. 306; Kelly 499; 12 S, W. 1070; iSabrinos vs. vs. West, 80 N. Y. 139; Harrison Chamberlain, 76 Tex. 624; 13 S. W. vs. Clark, 87 N. Y. 572; Power vs. 634; Proctor vs. Dicklow, 57 Kan. Burmester, 34 N^. Y. S. 716; Stalte 119; 45 Pac. 86. vs. Creusbauer, 68 Mo. 254; Slagle iStee also U. S. F. k G. Co. vs. vs. Entrekin, 44 0. S. 637 ; 10 N. E. Russell, 141 Ky. 601; 133 8. W. 675; Ordinary vs. Kershaw, 14 N. 972. J. Eq. 527; 'Stovall vs. Banks, 10 310 State vs. Berning, 74 Mo. 87. Wall. 583; Wiseman vs. Swain, 114 311 Annett vs. Terry, 35 N. Y. S. W. 145: McDonald va. The Peo- 256. pie, 222 Til. 325: 78 N. E. 609; 312 Kearney vs. Sascer, 37 Md. Sjoli vs. Hngenson, 122 N. w. 1008; 264; Seat vs. Cannon, 20 Tenn. 471. 19 N. D. 82; McDonald v. State of 3l2o Curtis vs. National Bank, 39 0. '9. 579'; Thompson vs. Mann, 65 W. Va. 648; 64 iS. E. 920. 384 THE LAW OF SUEETYSHIP. §222. Defenses to action upon administration bonds. Any order or judgment discharging the administrator from liability will release the sureties on the bond.''' So also, a dis- charge of a co-surety will discharge the remaining surety.'" The consent of the distributees to the irregularities of the ad- ministration from which the loss arises, will be a bar to an action on the bond, as where the administrator uses the funds of the estate in his private business with the knowledge and consent of the beneficiaries of the estate.'^" "Where the administrator executes his individual note to the distributee, which is accepted as payment, the sureties upon his bond are not liable for his non-payment of the note.''" If the person who is administrator occupies a double trust, and is entitled to receive the fund in a trust capacity as the dis- tributee of the estate, the law will make the transfer whenever • the payment becomes due, and relieve the sureties of the admin- istrator. Thus, if one is acting both as administrator and guardian, as soon as the amount due to him as guardian is definitely ascertained, it will be deemed paid, and the guardian bond and not the administration bond will thereafter be liable for the conversion of the fund."^ 313 Austin vs. Raiford, 68 Ga. suited that by her authority the 201; Tucker vs. Stewart, 147 Iowa portion of the trust fund which she 294; 126 N. W. 183. had been entitled to receive was de- Contra — ^11. S. F. & G. iCo. vs. The livered to Riggin and lost to tlie People, 15fl 111. App. 3'5; People vs. fund. In executing his individual Rardin, 171 111. App. 226. check upon the Farmers' Bank, 311 Sta-te vs. Barrett, 121 Ind. 92; Riggin acted wholly apart from Ms 22 N. E. 969. duties as executor. "He did not ex- 315 Rutter vs. Hall, 3il 111. App. ecute it as executor, nor in any 647; Forbes vs. Keyes, I'QS Mass. way represent that it would be 38; 78 N. E. 7'3i3. paid out of money subject to the 316 Hubbard vs. Ewing, 6.3 Tenn. control of the executors. It fol- 404 ; Riggin vs. ■ Creath, 60 O. S. lows that whatever may have been 114; 53 N. E. 1100. In this case Mrs. Creath's reason for preferring the distributee accepted the individ- the individual check of Riggin to ual check of the executor and gave that of the executors, she was the a receipt in full ; held, Sohauck, J. : sole judge of its sufficiency, and she "In lieu of payment in cash or by is bound by her election, and es- the check of the executors upon the topped to maintain an action on the trust fund, she voluntarily and for bond because of the non-paylnent of purposes of her own accepted the the check which she chose to re- individual check of Riggin upon a oeive." different bank for the balance, and But see Hoge vs. Vintroux, 21 W. in consideration of that check and Va. 1. the advancements previously made 3i7 Ruffin vs. Harrison, 81 N. C. to her, she executed to the execu- 208; Bell vs. People, 94 111. 2'30; tors, for the purpose of their set- State vs. Gheston, 5il Md. 353; tlement, her receipt for the entire Odell vs. Howie, 77 Va. 361. ilistributive sbare, from which it re- But see Smith vs. Gregory, 36 JUDICIAL BONDS. 385 If an executor conforms to the requirements of the will, his acts will be deemed valid even though the will is thereafter set aside, and his sureties are not liable for his failure to restore the assets legally disposed of before the will was nuUified.'^^ The sureties upon an administration bond cannot defend upon the ground that the appointment of the principal wus irregular, as where the letters were issued from the wrong county.'^" §223. Who may maintain action on administration bonds. If an administrator is removed or for any other cause the of- fice becomes vacant, the common law confers upon his successor Grat. (Va.) 248; Burton., vg. An- derson, 5 Har. (Del.) 221. In Wilson vs. Wilson, 17 0. S. 150, it was held that wliere a party is 'acting in a double capacity, an'd is possessed of a fund in one ca- pacity which it is his duty to trans- fer to himself in another, that such transfer will be presumed, the Court said, "But this legal pre- sumption may be rebutted. It is a kind of legal fiction; and legal fic- tions have vitality and effect to promote the ends of justice, but not to thwart 'them- Wilson was not required to go through any suc!h foolish formality as taking the fund which he held as administra- tor from one pocket and putting it into another as guardian; but there were other and more sensible ways of indicating the capacity in which he regarded himself as holding the fund. He might legitimately have charged himself with it in his ac- count as guardian, and credited himself with having made payment of it to the guardian in his a»- count as administrator. But he did Just the contrary to this. He re- frained from charging himself with it as guardian, and thus, it would seem, prevented its forming any ele- ment of recovery against him in, the former action against him and his sureties on the bond as guardian. . . . . We are of the opinion that these unequivocal manifesta- tions of intention on the part of the principal defendant, Wilson, ef- fectually rebut the legal presump- tion w'hioh his counsel invoke in his behalf; estop him to deny that he holds the fund in his capacity as administrator." In Potter vs. Ogden, 136 N. Y. 384, it is held: "The sureties upon an administrator's bond remain liable until they can show payment by him to the parties legally ©nr titled to receive the assets, and when the sole defense to an action upon the bond is the technical and con- structive transfer of liability from the administrator as such to him- self as guardian, this must be clearly established, so as to leave no doubt of the liability of the sureties upon his bond as guardian." To the same effect see State vs. Whitehouse, 80 Oonn. Ill; 67 Atl. 503; State vs. Branch, 134 Mo. 592; 36 S. W. 226; In re Switzer, 201 Mo. 66; 9S S. W. 461. 318 Jones vs. Jones, 53 Ky. 373. But see Crow vs. Crow, 53 Ky. 383. In this case an action to con- test the will was begun the day the administrator was appointed, and it was held that the sureties were liable for the failure of the admin- istrator to return to the estate as- sets distributed before ttie decree nullifying the will was entered. 3i9McC?hord vs. Fisher, 52 Ky. 193. See also Foster vs. Common- wealth, 35 Pa. 148; State vs. An- derson, 84 Tenn. 321; Hoffman, Admx., vs. Fleming, 66 0. S. 143; 64 N". E. 63; Elizalde vs. Murphy, 163 Cal. 681; 126 Pac. 981. 386 THE LAW OF SURETYSHIP. f.itle to the unadministered assets. This includes only such property as remains in specie and the debts due the estate from the debtors of the decedent. If the prior administrator has con- verted to his own use any part of the estate, the administrator de bonis non has no cause of action on a bond of his predecessor to recover his shortage, except where such authority is specially conferred by statute.'^" The sureties upon the bond are liable, however, to the creditors and legatees, and such distributees may maintain action,^^^ and the same right accrues to the heirs.^^' A co-administrator who has executed a joint bond with tlie other administrator may maintain an action on the bond for the conversions of his associate. He may recover on the bond in his representative capacity, notwithstanding that he might after- wards be called upon individually to respond to his sureties upon his obligation of indemnity, as one of the principals in the bond.'^^ §224. Bonds of guardians — Scope of liability. A guardian of a minor ward undertakes that he will protect the person and property of the beneficiary, obey the orders of the court in reference thereto, and render due account of the trust fund and of all his acts touching the duties of his office; and he is required by law to execute a bond conditioned for the faithful performance of all the obligations which the trust im- poses. In accepting such office, he stipulates by legal implication, that he is fit and capable of managing the business affairs of his ward, and his bond is liable if such implied representation is not true. 320 United States vs. Walker, 109 436; 16 South. 25; Waterman vs. U. S. 258; 3 S. Ct. 277; In re As- Dockray, 78 Me. 139; 3 A«. 49; signment of Richart, 58 111. App. 1^°^}^ vs Pacific Surety Co., 130 -,, X , TT „, r,, 55 111. App. 502. 91; Johnson vs. Hogan, 37 Tex. 77; ,,, Commonwealth vs. Rogere, 53 Court of Probate vs. Smith, 16 R. p^^ ^r-Q I. 444; 17 Atl. 56. The administra- 322 Gk)ux vs. Moucla, 30 La. Ann. tor de bonis non is in many States 743; State vs. Campbell, 10 Mo. specifically authorized by Statute to 724. maintain action on the bond. Tul- ''" Sperb vs. MeCoun, 110 N. Y. burt vs. Hollar, 102 N. C. 406; 9 S. ^'^l' ^^ ^- "?; ^*^- „ , , ,on ,-,„„„' „ ,„„ ., See also Nanz vs. Oakley, 120 E. 430; Banks vs. Speers, 103 Ala. j;^ y 84- 24 N E 306 JUDICIAL BONDS. 387 If he makes an improvident loan of moneys belonging to the trust fimd, taking insufficient security, the bond will be charge- able.'" The guardian undertakes the responsibility for all the prop- erty belonging to the ward, whether derived from the estate of the ancestor of the ward or from any other source,'''" and the sureties are liable, as in the case of an executor or an administra- tor,'"" even though the money or property comes into the hands of the guardian before the execution of the bond,'^^ and is con- verted in whole or in part prior to the date of the bond.'^' A special bond given by requirement of law to secure the pro- ceeds of a sale of land belonging to the ward, is not cumulative with the general bond of guardianship, neither will the general bond be liable for conversions of the special fund.'^* 324 Richardson vs. Boyflton, 12 Allen 138; Lee vs. Lee, 67 Ala. 406. In this case it was held that the sureties are liable for loans made without security, even though the borrower was entirely solvent at the time the loan was made. See also Bell vs. Rudolph, 70 Miss. 234; 12 South. 153. 325 Carr vs. Askew, 94 N. C. 194. The surety in a general guard- ianship bond is liable for money paid to the guardian in condemna- tion proceedings. Mann vs. Mann, 119 Va. 630, 89 S. K. 897. 326 Arete, Sec. 235. 327Merrels vs. Phelps, 34 Conn. 109; Bockenstead vs. Perkins, 73 Iowa 23; 34 N. W. 488; Knox vs. Kearns, 73 Iowa 286; 34 N. W. 861; iState vs. Bilby, 50 Mo. App. 162. 328 Douglass vs. Kessler, 57 Iowa 63; 10 N. W. 313; Fogarty vs. Ream, 100 111. 366. Contra — ^State vs. Shackleford, 56 Miss. 648. In Aetna Indemnity Co. vs. State, 101 Miss. 703; 57 Sb. 080, it was held that where a guardian, while acting under his first bond, con- verted moneys of his ward, and after the discbarge of the first bond, and the giving of a new bond, though then solvent and able to pay the amount converted, neglected to pay such amount to himself as guardian for the use of the ward, there was a breach of the second bond as well as of the first. 329 Madison Co. vs. Johnston, 51 Iowa 152 ; 50 N. W. 492 ; Bunce vs. Bunce, 65 Iowa 106; 21 N. W. 205; Morris vs. Cooper, 35 Kan. Ii56; 10 Pac. 988; Judge of Probate vs. Toothaker, 83 Me. 195; 22 Atl. 119; State vs. Harbridge, 43 Mo. Apjp. 16; Conumonwealth vs. Pray, 125 Pa. 542; 17 Atl. 450; Common- wealth vs. Amer. Bonding & Tr. Co., 16 Pa. Super. Ct. 570; Kester vs. Hill, 42 W. Va. 611; 26 S. E. 376; Smith vs. Gummere, 39 N. J. Eq. 27. Contra — Southern Surety vs. Bur- ney, 126 Pac. 748; 34 Okl. 5.52. In Ohio, where the Statute (Sec. 6269) provides that the guardian shall be required "at the expiration of his trust, fully to account for amd pay over to the proper person all of the esta;te of his ward remain- ing in his hands," it was considered that this language was sufBeiently comprehensive to include a liability on the genera! bond for all assets of the estate, whether derived from, personalty or from sale of land, in a case where the condition of tihe general bond was to "faithfully disr charge all of bis duties as such guardian as is required by law." Tuttle vs. Northrop, 44 0. S. 178; 5 N. W. 6'50. In Rudy vs. Rudy, 145 Ky. 245; 140 S. W. 192, a guardian soM the land o(f his ward and converted the proceeds. In an action on the bond of the guardian, the sureties were held not liable, it appearing that because the guardian had failed to 388 THE LAW OF SURETYSHIP. Debts due the ward by the guardian become assets in the hands of the guardian, and in contemplation of the law the offi- cer will be considered as having paid the debt to himself as trustee as soon as it matures, and his sureties are liable for its proper application, the same as for money actually received.^'"' Money paid the guardian after the ward maintains his majority, although paid in for the accoimt of the ward, does not, in case of conversion, become a charge against the sureties/'"^ §225. Settlement of guardian's account — Release of sureties on the bond. The duty of the guardian is not ended when the ward attains majority, and the sureties continue liable for the proper settle- ment and adjustment of the afPairs of the ward even though the business transactions extend beyond the time of the minority. The delay of the ward after arriving of age in compelling set^ tlement will not relieve the sureties for defaults committed after the term of minority, since the sureties have the same right as the ward to compel a speedy accounting and the resulting loss is as much the consequence of their ovm negligence as that of the ward.==^ It is, however, the duty of the guardian to make settlement and pay over the money in his hands to the ward as soon as he attains his majority, and a failure to do so is of itself a breach of the bond for which action can at once be brought.^'^ The bond must stand as security for a full and fair settlement by the guardian, a release by the ward, and the execution of a receipt reciting that the whole amount of the estate had been paid over when it had not in fact been paid, will not constitute a defense to the sureties, such settlement will be presumed to be comply with the statutory formali- ing, 79 Mass. 387. This rule in ties required for such sale, the sale some jurisdictions is limited to was -void. The court held that, cases in which the guardian is sol- flince the sale was void, the moneys vent at the time of his appointmenit. received were not paid to the prin- Black vs. Kaiser, 91 Ky. 422; 16 cipal in his capacity as guardian S. W. 89 ; Johnson vs. Hicks' Guard- but as an individual, and since tihe ian, 97 Ky. 116; 30 S. W. 3; U. S. bond covered only his default . as F. & G. Co. vs. State, 81 N. E. 22.6; guardian, the sureties, would not be 40 Ind. App. 136. liable for his defaults in any other 33i Shelton vs. Smith, 62 Tenn. 82. capacity. ^^^ Newton vs. Hammond, 38 0. S. Stee also Swisher vs. MoW'hinney, 430. 64 0. S. 343; 61 N. E. 1149. »33 People vs. Brooks, 22 111. App. 330 Sargent vs. Wallis, 67 Tex. 5i94. 483 ; 3 S. W. 721 ; Mattoon vs. Cow- JUDICIAL BONDS. 389 fraudulent'" Also where the ward by misrepresentation is in- duced to accept worthless securities in settlement, he may there- after repudiate the transaction and recover from the sureties/''^ The ward must, however, elect to rescind the transaction with- in a reasonable tima'^' It is held that the acceptance by the ward of the note of the guardian in settlement of his accounts, is a full defense to the sureties/" Where the guardian became trustee for the ward, and upon final accounting passed receipt to himself as guardian executed in his trust capacity, it was held that the sureties upon the guardian bond were liable for the amount receipted for.^'^ §226. An adjudication against the guardian is conclusive against the sureties. , An approval of the final account of a guardian and an order for the payment of the balance found due, is conclusive against the sureties, although not a party to the accounting, and although they had no actual notice of the filing of the account.^'' 334 Carter vs. Tice, 120 111. 277 ; guardian and ward, and by agree- 11 N. E. 529 ; Gillett vs. Wiley, 126 ment with the ward, there being no 111. 310; 19 N". E. 287; People vs. fraud in the transaction, will re- Borders, 31 111. App. 426; Parr vs. lease the sureties, even though the State, 71 Md. 220; 17 Atl. 1020. amount was never actually paid to 336 Douglass vs. Ferris, 138 N. Y. the ward. People vs. Seelye, 146 192; 33 N". E. 1041; Nationail 111. 1S9; 32 N. E. 458. Surety Co. vs. Heiniann, 103 N. E. 339 Ream vs. Lynch, 7 111. App. ' 105. L61 ; Kaittleman vs. Guthrie's Es- 336 Hardin's Admr. vs. Taylor, 78 tate, 142 111. 357; 31 N. E. 589; Ky. 593. State vs. Slauter, 80 Ind. 597; 337 Price vs. Barnes, 7 Irid. App. Knepper vs. Glenn, 73 Iowa 730; 36 1; 34 JT. E. 408. ^f. W. 763; Braiden vs. Mercer, 44 338 state vs. Branch, 134 Mo. 592; 0. S. 339; 7 N. E. 1.5.5; Conimon- 36 S. W. 226. In this case the wealth vs. Julius, 173 Pa. 322; 34 guardian was solvent at the time of Atl. 21 ; Shepard vs. Pebbles, 38 his settlement, and the funds of Wis. 373; Southern S'urety Co. vs". the ward were invested in his pri- Burney, 126 Pac. 748; 34 Okl. 5'52; vate business, there was no actual Bealcley vs. Cunningham, 165 S. W. withdrawal of the amount from tlie 250; Title Guaranty & Surety Co. business; the conversion was the vs. Slinker, 128 Pac. 696; 35 Okl. result of a subsequent business fail- 128. ure by the guardian. It has sometimes been oonsidered The investment by the guardian that such adjudication against the of the amount due on final settle- guardian is only prima fa«ie evi- ment, for the joint account of the denoe against the sureties, where the 390 THE LAW OF SURETYSHIP. Where tbe settlement is procured by fraud, and an entry made approving securities turned in as part of the settlement, and the guardian discharged, such judgment is not conclusive on the M^ard, and an action may be maintained on the bond to recover for the amount of vsrorthless securities in vrhich the guardian in- vested the funds of the estate.'*" §227. Bonds given in the course of insolvency proceedings. Koceivers, trustees or assignees in insolvency are officers of the court, charged with the duty of receiving and preserving the property of the insolvent, pending a determination by the court of the rights of the creditors. This class of trustees are execu- tive in their functions, they have been termed the " hand of the court." '" They represent neither the claimants nor the insolvent, but occupy a neutral middle ground subject only to the orders of the court; the property in their possession is in custodia legis and generally their possession cannot be disturbed vsdthout the ex- press consent of the court. These officers are required to execute bond, to cover not only their fidelity in properly accounting for money and property coming into their hands, but also conditional that they will be responsible in damages if they fail to obey the orders of the court in all matters touching the administration of their trust. A failure to perform the order of the court in respect to the disbursements of the trust fund is a breach of the bond, and ac- tion may be brought by the creditors entitled to distribution,'*'' settlement of account is made with- sn Ellicott vs. Warford, 4 Md. 85. out notice to the sureties. State vs. Eceleston, J. : " The appointment Hoster, 61 Mo. 544; State vs. Ross- of a receiver does not determine any waag, 3 Mo. App. 11. right, or affect the title of either 340 State vs. Peckham, 136 Ind. party, in any manner whatever. He 198; 36 N. E. 28. In this case the is the officer of the court; and truly guardian loaned the money of the the hand of the court." "ward to an insolvent partnership, 342 Van Slyke vs. Bush, 123 N- Y. and in his settlement represented to 47; 25 N. E. 196; Garver vs. Tis**^- the court that the firm was solvent, er, 46 0. S. 56- 18 N. E. 491. and thus secured an approval of his accounts. JUDICIAL BONDS. 39J or by the successor in office where tlie officer has been removed.'** An order of the court fixing the amount due from a receiver or assignee is conclusive upon the sureties.^** It is held that where a creditor attacks an assignment for fraud and secures a vacation of the trust, that he cannot there- after recover from the sureties upon the bond for a failure of the assignee to account for the fund, since the assignment as to such creditor was a nullity, and he might have levied upon the prop- erty of the assignor.^*" §228. Bail bonds. Bail is the delivery or bailment of a person to his sureties, and is brought about by the execution of a bond in the manner and form provided by statute, conditioned to redeliver the de- fendant to the custody of the law at a time and place appointed in the bond. Bail cannot be given except by permission of the court, and on terms prescribed by the court. The granting of bail is a ju- dicial act and iinless an order is made admitting the defendant to bail, the transaction is voluntary, and the undertaking a nullity.'*' The authority and jurisdiction to admit to bail is conferred by law and the bond will be void, and impose no liability on the 343 Phillips vs. Ross, 36 0. S. 458. prosecuting the bond declared the 844 Walsh vs. Miller, 51 0. S. 462; assignment void for fraud. As to 38 N. E. 381. them the assignment was a nullity, But see People vs. White, 28 Fun and the judgments obtained by them 289. are conclusive. It follovrs that they S45 People vs. Chalmers, 60 N. Y. were not, and could not be, preju- 154. " The statute was intended to diced by the assignment. It never protect the interests of creditors un- for an instant placed the property der valid assignments made for their beyond the reach of legal process, benefit, and creates the requisite ma- They might have levied upon it by chinei-y for accomplishing that ob- execution, and the process of in- ject; but it was not intended to junction, and the appointment of a secure the payment of assets upon receiver were open to them." judgments obtained in hostility to 34(5 State vs. Gilbert, 10 La. Ann. the assignment. The judgments ob- 532; Morgan vs. Commonwealth, 12 tained in behalf of the creditors Bush (Ky.) 84. S92 THE LAW OF SURETYSHIP. sureties, if the bailment is ordered by an officer having no power to act in the premises.^*' Parties to a recognizance or bail bond are estopped by the execution of it to deny the truth of the recitals it contains.'^'" If the bond recites all the necessary jurisdictional facts the sureties will be estopped from asserting a lack of authority in the officer to take bail/** neither can the sureties question the regularity of the proceedings antecedent to taking bail, such as whether the requisite preliminary affidavit or information was filed.^*" §229. Conditions in bail bonds— Time of appearance. An important and distinguishing feature of bail is the time fixed in the undertaking for the appearance of the defendant. In general the recognizance must stipulate a fixed time of ap- pearance. There can be no forfeiture of bail unless the obliga- tion is definite. It was held that a requirement to appear on the " day of April next" is void for uncertainty.^'" A stipulation to appear at the next term of court, the time on the coming in of the court being fixed by law, is sufficiently def- inite,^^^ even though the wrong date is specified in the bond.°°* SIT United States vs. Hudson, 65 See also People vs. Meacliam, 74 Fed. Eep. 68; State vs. Caldwell, 111. 292.- 124 Mo. 509; 28 S. W. 4; Dugan vs. 350 Colemam vs. State, 10 Md. 168. Commonwealth, 69 Ky. 305 ; Pax;e See also United States vs. Keiver, vs. Mississippi, 25 Miss. 54; Blevins 56 Fed. Rep. 422. Where the condi- vs. State, 31 Ark. 53; Rupert vs. tion was to appear at a special term People, 20 Colo. 424; 38 Pac. 702. of the United States District Court But see Jones vs. Gordon, 82 Ga. thereafter to be called. 570; 9 S. E. 782. But see State vs. Ansley, 13 La. 347(1 Husbands vs. Commonwealth, Ann. 298. Where the appearance 143 Ky. 290; 136 S. W. 632. was to be "when notified," this was 348 Harris vs. State, 60 Ark. 212; considered sufficiently definite. 29 S. W. 751. In Kellogg vs. State, 43 Miss. 57, 3*9 State vs. Nieol, 30 La. Ann. the term of the Cmirt and the day 628; State vs. Hendricks, 40 La. of the week and month was stipu- Ann. 719; 5 South. 24; United lated, but the year was omitted, — States vs. Wallace, 46 Fed. Eep. held, that the next term of court 569; Peck vs. State, 63 Ala. 201; was sufficiently indicated, and thalt Junction City vs. Keeffe, 40 Kas. the sureties were liable. 275; 19 Pac. 735. 35i O'Neal vs. Ptate, 35 Tex. 130. Contra— Seal vs. State, 102 S. W. 352 Brite vs. State, 24 Tex. 2119; 414; 51 Tex. Civ. App. 425. Territory of Oklahoma vs. Conner, In Dilley vs. State, 3i Idaho 28Si; 17 Okl. 135 ; 87 Pac. 591 ; Proseck 29 Pac. 48, it was held that the vs. State, 38 0. S. 606. sureties upon a bail bond cannot See also People vs. Weltih, 47 question the jurisdiction dtf the How. Pr. 420. Where the condition magistrate who took the bond. JUDICIAL BONDS. 393 Where the bond recites a date when no court is held, and there is nothing in the undertaking or the record from which it can be, inferred that the next term of court was intended, the instru- ment is void.''^'' If the defendant appears at the " next term " as set out in the bond, and the cause is continued, the bond will remain in force from term to term, unless renewal bond is substituted, and the sureties will be held for the defendant's non-appearance at a subsequent term.^^* This construction will not, however, apply except to continuances in regular succession in the course of the business of the court, a stipulation between the defendant and the prosecution postponing the trial to some future term of court, the sureties not consenting, will discharge the bail. This was so held where an entry was made on the minutes of the court post- poning the trial until the determination of cases pending in an- other court.^^^ But the liability of the sureties is not affected by was the next term of court, but, by clerical error, a date was named which was already past. To the same effect see Stata vs. Lay, 128 Mo. 609; 29 S. W. 999; Allen vs. Commonwealth, 90 Va. 356; 18 S. E. 437. But see Wegner vs. State, 28 Tex. App. 419; 13 S. W. 608. Where the impossible date " A. D. 188- " was named as the time of appearance and the bond was held to be de- fective. 353 Burnett vs. State, 18 Tex. App. 283; Treasurer of Vermont vs. Merrill, 14 Vt. 64. S54 Stokes vs. People, 63 111. 489; Btate vs. Smith, 66 N. C. 620; Pickett vs. State, 16 Tex. App. 648; People vs. Hanan, 106 Mich. 421; 64 N W. 328; Ramey vs. Com- monwealth, 83 Ky. 534; Rubush vs. State, 112 Ind. 107; 13 IST. E. 877; State vs. Benzion, 79 Iowa 467; 44 N. W. 709: State vs. Breen. 6 S. D. 537; 62 N. W. 135; St. Louis vs. Henning, 235 Mo. 44; 135 S. W. 5; Staite vs. Holt, 145 N. C. 450; 59 S, E. 64. Contra — Colquitt vs. Smith, 65 Ga. 341. 355 Reese vs. United States, 9 Wall. 13, Field, J.: "If, now, we apply the ordinary and settled doe- trine, which controls the liabilities of sureties, it must follow that the sureties on tihe recognizance in the suit are discharged. The stipula- tion, made without their consent or knowledge, between the prinicipal and the government, has changed the character of his obligation; it has released him from the obliga- tion which they covenanted that he should complj', and substituted an- other in its place. It is true, the rights and liabilities of sureties on a recognizance are in many respects different from those of sureties on ordinary bonds or commercial con- tracts. The former can at any time discharge themselves from liability by surrendering their principal, and they are discharged by his death. The latter can only be released by payment of the debt or perform- ance of the act stipiulated. But in respect to the limitations of their 394 THE LAW OF SUBETYSHIP. an order of court changing the date of the term, as the sureties will be deemed to have had in contemplation the possible exer- cise of this power by the eourt.^"" §230. Same subject — Place of appearance. There can be no forfeiture of a bail bond unless a place of appearance is definitely specified in the undertaking.^"' A con- dition expressed in the alternative is held to be void for uncer- tainty as where a magistrate takes a recognizance conditioned for an appearance before him or some other magistrate.^'^* So also a bail to appear before a court which has no existence.'" In a ease where the judge, without statutory authority, and of his own motion, ordered a change of venue, it was held that the failure of the accused to appear in the court to which the case was transferred was not a forfeiture of the bail,'®" although liability to the precise terms of their contract, and the effect upon such liability of any change of the terms without their consent, their positions are similar. And the law upon tihese matters is perfectly well settled. Any change in the con- tract, on which they are sureties, made by the principal parties to it without their assent, disicharges them, and for obvious reasons. When the change is made they are not l^ound by the contract in its original form, for that has ceased to exist. They are not bound by the contract in its altered form, for to that they have never assented. Nor does it matter how trivial the change, or even that it may be o^ advantage to the sureties. They have a right to stand upon the very terms of their undertaking." 356 State vs. Aubrey, 43 La. Ann. 188; 8 South. 440. 357 Barnes vs. State, 36 Tex. 332; Pill vs. State, 43 Neb. 23; 61 N. W. 96; Hutchinson vs. State, 43 Tenn. 95. In Thomas vs. State, 127 S. W. 1030, held: "A bail bond given for appearance of accused before the district court of n county is insuf- ficient, the county having two dis- trict courts, and the particular one not being designated, though the time and place is stated." 358 State vs. Allen, 33 Ala. 422. 359 Coleman vs. State, 10 Md. 168. In this case the recognizance was to appear before the "County Court," and the Bail was held to be void, there being no such court, the court by this name having been pre- viously abolished and a "Circuit" Court established in its place. But see Petty vs. People, 118 III. 148; 8 N. E. 304. The condition of the recognizance was that the ac- cused should appear before the "Criminal 'Court," and there was no such court, but the Circuit Court was vested with exclusive criminal jurisdiction. This was held to be sufficiently definite. 300 Adams vs. People, 12 111. App. 3S0; State vs. Young, 20 La. Ann. 397. JUDICIAL BONDS. 395 a transfer of the case in ajccordancse with authority conferred by law binds the sureties for the appearance of the accused in the court to which the case is transferred.'"^ Also where by act of Legislature all pending criminal cases^ are tranjsferred to another court, the parties to> an undertaking in bail are bound for the ap- pearance of the defendant in the substituted court.°°^ It was held that where a prosecution was removed from the State Courts to the Federal Courts in accordance with the pro- visions of law, that the bail was incident to the prosecution, and followed the case into the Federal Court, and would not be for- feited by a failure to appear in the Stat© Court as recited in the bond.'"' §231. Defenses against bail bonds. The sureties can not defend against a recognizance, where the defendant fails to appear, on the ground that the indict- ment or information is defective,'"* or that the defendant was illegally taken into custody,'"^ or that the bail was executed before the accused was arrested, or that the statute under which the accused was indicted was unconstitutional,'"^'^ as his appearance for the purpose of executing the recognizance places him in legal custody and waives the irregularity.'"" Where conditions are imposed not required by law, the bond will not be void, but the unauthorized conditions will be con- sidered as surplusage and the bond held effective as to the other terms.""' 381 Pearson vs. Brown, 7 Tex. App. Contra — Mason vs. Terrell, 3 Ga. 279 ; Beasley vs. State, 53 Ark. 67 ; App. 348 ; 60' S. E. 4. 13 S. W. 733; State vs. Brown, 16 385 Littleton vs. State, 46 Ark. Iowa 314. . 413. 382 Ramey vs. Comim., 83 Ky. 534. se.w u. S. vs. Du Faur, 187 Fed. 383 Davis vs. South Carolina, 107 812; 109 C. C. A. 572; People vs. U. S. 597; 2 S. Ct. 636. Rubright, 160' 111. App. 528. 384 United States vs. Evans, 2 366 vias . vs. Comm., 7 Ky. L. Reip. Fed. Rep. 147; Hardy vs. United 742. States, 71 Fed. Rep. 158; State vs. But see Deer Lodge Co. vs. At., Livingston, 117 Mo. 627; 23 S. W. 3 Mont. 168, where recognizance 766; State vs. Morgan, 124 Mo. 467; taken before any written complaint 28 S. W. 17 ; Hester vs. State, IS was filed was declared void. Tex. App. 418; Lee vs. State, 25 See also Hodges vs. State, 20 Tex. Tex. App. 331; 8 S. W. 277; Fried- 493. line vs. State, 98 Ind. 366 ; Harris so? ^gtate vs. Adams, 40 Tenn. 259 ; vs. State, 60 Ark. 209 ; 29 S. W. State vs. iCrowley, 60 Me. 103 ; State 640; 'Sharpe vs. Smith, 59 Ga. 707; vs. Cobb, 71 Me. 198. State vs. Poigton, 63 Mo. 521; State But see Durein vs. State, 38 Kan. vs. Sureties of Krohne, 4 Wyo. 347; 485; 17 Pac. 49; Turner vs. State, 34 Pac. 3. 14 Tex. App. 168. 396 THE LAW OF SUEETYSHIP. If the bond fails to specify any offense for whidb the bail is given, the undertaking is void/"* but it -will be sufficient if the bond specifies the offense in general terms.^°° Where the bond describes one offense, and the indictment is for another and different offense, the variance will invalidate the bail,^'" but if the variance is merely one of degree, such as a recognizance for robbery and an indictment for petit larceny, the bond is not invalidated.^^^ A bail bond conditioned to answer for an act which is not an offense against the law is not binding on the sureties. It was held that a recognizance to appear and answer for " a charge of gaming," '^^ or for " being concerned in a row," ^" or " unlaw- fully selling mortgaged property," ^'* is not binding since no indictable offense is charged. It is no defense to an action upon a bail bond that there was no indictment rendered against the accused. The sureties un- 36S Horton vs. State, 30 Tex. 191 ; Littlefield vs. State, 1 Xex. App. 722; Waters vs. People, 4 Col. App. 97 ; 35 Pac. 56 ; State vs. Wooten, 4 La. Ann. 515; Simpson vs. Comim., 31 Ky. 523. Contra — People vs. Gillman, 125 N. Y. 372; 26 N. E. 469. "Being the voluntary act of the party, the un- dertaking permits the presumption of regularity of the proceedings, and by coming into the proceeding in that manner, in behalf of the ac- cused, the surety will be presumed to know upon what charge the pris- oner was held by the sheriflf. The statement of the offense charged, therefore, is not of the essence of the undertaking of bail, nor does it bear materially upon the obliga- tion." 3f 9 State vs. Merrihew, 47 Iowa 112; People vs. Dennis, 4 Mich. 609; Territory of Oklahoma vs. Conner, 17 Okl. 135; 87 Pac. 591; State vs. O'Keefe, 108 Pac. 2; 32 Nev.'331; Marmaduke vs. People, 191 Pac. 337; 45 Col. 357; Territory vs. Minter, »8 Pac. 1130. 370 Reese vs. People, 11 III. App. 346; State vs. Fomo, 14 La. Ann. 450; Draughan vs. State, 35 Tex. Cr. Rep. 51; 35 S. W. 667. Gray vs. State, 43 Ala. 4. In this case the recognizance was to answer the charge of perjury, and the indictment was for burglary. Addison vs. State, 14 Tex. Crim. App. 568, where the recognizance was for theft and the indictment for swindling. Contra — People vs. Metcham, 74 111. 292. snMudd vs. Comm., 14 Ky. L. Eep. 672. See also Cttmm. vs. Teevens, 143 Mass. 210; 9 N. E. 524; State vs. Bryaait, 55 Iowa 451 ; 8 N. W. 303 ; Murray vs. People, 111 Pac. 711; 49 Colo. 109. 372Tousey vs. State, 8 Tex. 173. 373 state vs. Ridgley, 10 La. Ann. 302. 374 Cravey vs. State, 26 Tex. App. 84; 9 S. W. 62. See also Woods vs. State, 103 Si. W. 896; 51 Tex. Or. App. 595; Martin vs. State, 145 S. W. 916. JUDICIAL BONDS. 397 dertake for the appearance of their principal at the time and place set out in the bond, and the bond is forfeited if he does not appear. The failure to indict does not of itself discharge the accused. His discharge still rests in the discretion of the court.'" The obligation of the surety is that the accused will appear at the time named in the bond, and it will be no defense that after the bond was declared forfeited the accused appeared to answer the charge.'^" It was held that a subsequent appearance and trial will release the sureties from the technical forfeiture. '''^ It is no defense that the prosecuting attorney consented to • the departure of the accused from the state and promised to dismiss the case at the next term, as such agreement is beyond his authority and will not be binding on his successor in office.'"" §232. Discharge or exoneration of bail. A surrender of the accused to the proper pubUe officer dis- charges the bail at once from all liability. Such surrender may be made at any time before the ease is called for trial.'''* The principal, in the contemplation of the law, is contiauaJly in the custody of his sureties and they may at any time cause his 3'6Champlain vs. People, 2 N. Y. 164; State vs. Scott, 20 Iowa 63; 82. "After the discharge of the State vs. Emily, 24 Iowa 24; iState grand jury, prisoners charged with vs. McGuire, 16 R. I. 519; 17 Atl. offenses and not indicted are not i318; Lee vs. State, 25 Tex. App. entitled to be set at liberty, if satis- 331 ; 8 l9. W. 277 ; Sproat vs. Comm., factory cause be shown for detaining 4 Ky. L Rep. 629 ; State vs. Drake, them in custody, until the meeting 40 Okl. 538; 139 Pae. 976. of the next grand jury. Under like S" Bearden vs. State, 89 Ala. 21 ; circumstances, persons out on bail . 7 South. 755; State vs. Burnham, are continued under recognizance 44 Me. 278; Statj vs. Sthexneider, when not discharged. 45 [La. Ann. 1445; 14 South. 250; "It is necessary, for the most ob- McArdle vs. McDaniel, 75 Ga. 270; vious reasons, that this power of State vs. Williford, 104 Kan. 221, detention should exist and be occa- 178 Pac. 612. sionally exercised. Offenders would Contra — Sproat vs. Common- otherwise frequently escape punish- wealth, 4 Ky. L. Rep. 629. ment, by the sickness or unavoidable 377a Husbands vs. Commonwealth, absence of a material witness, while 143 Ky. 290 ; 136 S. W. 632. the grand jury was sitting, and by See also Cameron vs. Burger, 120 various other accidental causes." Pac. 10; 60 Or. 458; Tanquary vs. See also State vs. K-le, 99 Ala. People, 25 Col. App. 531; 139 Pac. 256; 13 South. 538; 'McCoy vs. 1118. State, 37 Texas. 219; State vs. Mill- S78 Boswell vs. Colquitt, 73 Ga. saps, 69 Mo. 359; Mooney vs. Peo- 63; Kellogg vs. State, 43 Miss. 57; pie, ftl 111. 134; Hinkson vs. State of Sbuth Dakota vs. Casey, Comm., 14 Ky. L. Rep. 203. ('S. D.) 183 N. W. 971, 15 A. L. R. "BHangsleben vs. People, 89 111. 1521, and note. 398 THE LAW OF SURETYSHIP. arrest and commitment, and for that purpose, command the as- sistance of the sheriff and his officers.^^" It is held that the arrest of the accused at liie request of the sureties is of itself equivalent tO' a surrender and the release of the bond from all further liability.^'" But a mere request by a surety to a sheriff to talce the accused into custody, if not com- plied with, will not exonerate the surety, notwithstanding it was the duty of the officer to make the arrest.^'^ If after the principal has been surrendered by the bail, either voluntarily or in pursuance of an order of the court, he is again released and escapes, no liability attaches upon the bond.^*^ Where the principal, after the bailment, is again taken into custody, such re-arrest is constructively a surrender of the ac- cused and exonerates the sureties/^^ But it is held that the mere fact that the principal is taken into custody upon another charge and upon a warrant issuing out of the same court will not release the bail.^** The death of the principal releases the sureties from the obli- 379 State vs. Cunningliam, 10 (La. needed. It is likened to the re-ar- Ann 3D3; State vs. Lingerfelt, 109 rest by the sheriff of an escaping X. C. 775; 14 S. E. 75; Carr vs. prisoner." Sutton, 70 W. Va. 417; 74 S. E. 239. 38o Sternberg vs. State, 42 Ark. Taylor vs. Taintor, 16 Wall. 371. 127. " When bail is given, the principal But see Kamey vs. Coram., 83 Ky, is regarded as delivered to the cus- 534. tody of his sureties. Their domin- ssi People vs. Robb, 98 Mich. 397; ion is a continuance of the original 57 N. W. 257. imprisonment. Whenever they ^^^ People vs. McEeynolds, 102 choose to do so, they may seize him Cal. 308; 36 Pac. 590., and deliver him up in their dis- ^^^ Smith vs. Kitchens, 51 Ga, charge; and if that cannot be done 158; State vs. Orsler, 48 Iowa 343; at once, they may imprison him un- Medlin vs. Conrm., 74 Ky. 605 ; Rob- til it can be done. They may exer- erts vs. State, 22 Tex. App. 64; 2 S, cise their rights in person or by W. 622. agent. They may pursue him into ss^McGuire vs. Comm., 7 Ky. L another State; may arrest him on Eep. 287; Hartley vs. Colquitt, 72 the Sabbath; and, if necessary, may Ga. 351. break and enter his house for that But see Smith vs. State, 12 Neb. purpose. The seizure is not made 309; 11 N. W. 317. by virtue of new process. None is JUDICIAL BONDS. 399 gation of the bail bond,'*'" even though death occurs after for feiture-'^^ The arrest of the principal while out on bail and hiscor- finement in the penitentiary of another State will not exonerate his sureties.'" Where the accused is delivered over to the authorities of an- other State, by the governor honoring a requisition from such State, it is considered that the sureties are exonerated since the failure to appear is by act of the law of the State where the obli- gation was assumed.'** It was also held that the arrest of the principal by the Federal authorities upon the same charge and his subsequent imprisonment in another State released the sure- sespynes vs. State, 4S' Ala. 52; People vs. Meyer, 29 N. Y. 6iipp. 1148; Conner vs. State, 30 Tex. 84. 386 State vs. MoNeal, 18 N. J. L. 33; State vs. Cone, SSI Ga. 668; Mather vs. People, 12 111. 9; Wool- folk vs. State, 10 Ind. 5i32. ■ 3S7 Taylor vs. Taintor, 16 V/all. 366. The principal vsras admitted to bail in iConnecticut and went into the state of New York where he was arrested and taken by requisition proceedings to the state of Maine and there sentenced to a long term in the penitentiary. In an action oin the hond it was held — Smayne, J.: "It is the settled law of this class of cases that the bail will be ex- onerated where the performance of the condition is rendered impossible by the act of God, the act of the obligee, or the act of the law. Where the principal dies before the day of performance, the case is within the first category. Where the court be- fore whidh the principal is bound to appear, is abolished without qualifl- pation, the case is within the second. If thi; principal is arrested in the State ■VfJiere the obligation is given and sent out of the State by the governor, upon +.he requisdtion of the governor of anc^ther State, it is within the third. ... It is equal- ly well settled that if the impossi- bility be created by the obligor or a stranger, the rights of the obligee will be in nowise affected The law which renders the perform- ance -mpossible, and therefore ex- cuses failure, must be a law opera- tive in the State where the obliga- tion was assumed, and obligatory in its effect upon her authorities. If, after the instrument is executed', the principal is imprisoned in an- other State for the violation of a criminal law of that State, it will not avail to protect Mm or his sureties. Such is now the settled rule." See also Ingram vs. State, 27 Ala. 17; Cain vs. State, I5S Ala. 170; State vs. Horn, 70 Mo. 466; Yajr- brough vs. Comm., 89 Ky. 151; IB S. W 153; King vs. State, 18 Neb. 375; 2!5 N. W. 519; U. S. vs. Mar- fin, 17a Fed. 476. A statute ■provided as one of the defenses against forfeiture of a bail bond, as follows: "The sickness of the principal or some uneontroUalble circumstance which prevented Ms appearance at court, and it must in every such case be shown that his failure to appear arose from no fault on hi? part." It was held that the fact that the principal was at the time jn custody on a similar dharge in another county was a legal de- fense to a forfeiture of his bail bond. Wood vs. State, 103 S. W. 89'5; 51 Tex. Civ. App. 595; State vs. Funk, 127 N. W. 722; 20 N. D. 14'5; State vs. Row, 80' Iowa 5811; 5'7 N. W. 306; People vs. Eoibb, .98 Mich. 997; 57 N. W. 2B.7. See also Moore vs. 'State, 106 S. W. 368. 388 People vs. Moore, 4 N. Y. Cr. Eep. 20s ; State vs. Allen, 21 Tenn. 400 THE LAW OF SURETYSHIP. ties.'^' The sureties will be exonerated by the fact tbat the principal has been adjudged a lunatic and confined in an asylum.*'" Where the accused voluntarily places himself under military jurisdiction by enlisting in the army and thereby is placed beyond the reach of the process of the civil authorities, the sureties upon his bond will nevertheless be liable for his non- appearance.'"'^ The condition of the bail "to appear and abide by order of the court" is not satisfied by the fact that the defendant ap- pears at the trial and defends against the charge, if after con- viction he escapes, the bond will be forfeited.^^^ Where accused appears and pleads guilty and sentence is pronounced, he ceases to be in the custody of the bail and the sureties are discharged by operation of law.'"^" Nor can they be again bound by the subsequent vacation of the judgment and the granting of a new trial.*'^' 389 Comm. vs. Overby, SO Ky. 208. Cortra — Comm. vs. Terry, 53 Ky. 390 Comm. vs. Flemming, 15 Ky. 383. L. Eep. 49]; Fuller vs. Davis, 1 392 Neininger vs. State, 50 0. S. Gray 612; Wood vs. Comm., 33 S. 3M- 34 N. E. 63'3; Glasgow vs. W. (Ky.) 729. State, 41 Kan. 333; 21 Pac. 253. If the principal, although insane, Bui see State vs. Murmann, 12A has not been bo adjudged, the sure- Mo. 502; 2'8 S. W. 2. ties will be liable. Commonwealth 392a Ford vs. State, 140 S. W. vs. Allen., 197 Ky. 6; 162 S. W. 1'16. 734; 100 Ark. 515. Contro— Adler vs. State, 35 Ark. 3926 Miller vs. State, 48 So. 360; 517; Smith vs. People, 67 Colo. 452, 158 Ala. 73. 184 Pac. 372. The recovery upon a bail bond 39liState vs. Scott, 20 Iowa 63; is limited by the penalty. People Gingrich vs. People, 34 111. 448; vs. Parisi, 217 N. Y. 24; HI X. E. Huggins vs. People, 39 111. 241. 253 ; U. S. vs. Broadhead, 127 U. S. 212; People vs. Hanaw, 106 Mich. 421, 64 N. W. 328. CHAPTER VIIL CORPORATE SURETYSHIP. Sec. 283. Surety Companies — ^Compensated Suretyship. Sec. '234. Private and Corporate Suretyship Compared. Sec. 235. Corporate iSuretyship and Insurance Coaupared. Sec. 236. Corporate Suretyship as Affectec" by the Premium or Com- pensation Paid. Sec. 2'37. Corporate Compensated iSuretyship is Within the Statutes of Frauds. Sec. 238. Construction of Corporate Suretyship Contracts. Sec. 230. Surety Company Bonds as Affected by the Special Stipulations Inserted for Their Protection in the Contract. See. 240. Same Subject — iStipulation that the Obligee Shall Notify the Surety of any Act of the Principal that "May" Involve Ix)a« Upon the Bond. Sec. 241. Stipulaticiis Discharging Surety if Claim is not Made Within a Designated Time. Sec. 2142. Stipulation that the Amount Paid by Surety Upon the Bond Shall be Conclusive Against the Principal in an Action_ by the Surety Against the Principal for Indemnity. Sec. 243. Contract of the Compensated Surety Valid Only as a Col- lateral Undertaking. Sec. 2l4'3a. Joint lOontrol of Trust Funds. Surety companies — Compensated suretyship. Corporate Suretyship as a business enterprise has been de- veloped in recent times, but the principles of law defining the rights of the parties to a suretyship contract must of necessity be the same, whether the surety is a private person or an incorporated company, except so far as the liabilities of the latter are controlled and limited by the doctrine of ultra vires. . It would seem to be a self-evident proposition that the con- tractual relation is unaffected by the fact that the surety is incorporated and engaged in suretyship as a business and re- ceives compensation for the undertaking." « Barton tS. Title Guairanlty & S. A. Trust Co., 101 Tex. 63, 104 'Surety Co., 192 Mo. App. 561, 183 S. W. 1061, 106 S. W. 876, 22 S. W. 694, cited also in note, 12 L. R. A. (N. iS.) 364, 130 Ann. A. L. R. 389 (1921); Lonergan vs. St. Rep. 803. 402 THE LAW OF SURETYSHIP. The difference in the attitude of the private accommodation surety toward the principal and the attitude of the corporate compensated surety is manifest. The one is not in the business of suretyship and makes the contract as a favor and for the accommodation of the principal. The other makes suretyship a business .and for profit and usually dictates the terms of the undertaking. If the courts construe the one liberally and the other strictly, it is not because of any intent to eliminate any contract liabil- ity from the one, or to add anything to the obligations of the other. If the aoeommodation and compensated surety make exactly the same kind of contract, no court has yet gone so far as to construe the contracts differently, merely because one was corporate and compensated. Surety companies have been clas- sified with insurance companies for purposes of legislative control, because of the similarity of their business methods, but these statutes merely regulate the conduct of the business and do not relate to the suretyship questions involved.' 1 The business of insurance has regulation in the interests of the long been under legislative control. people. In some instances the courts Corporate suretyship was not, haw- hare held that the existing insur- ever, anticipated, and so not pro- ance regulations, without any s^/O- vided for in terms in the legislative cial' reference to surety companies acts regulating insurance. The simi- being made in the Statute, were larity in the methods of doing busi- broad enough to cover the foreign ness, especially the fact, that, like corporation seeking to do a surety- insurance, the business is directed ship business within the State, from a central or "home office" and Such was the holding in Illinois distributed through the country by where it was held that a. surety branch offices or agencies, and that company could not be incorporated its business is secured by solicitors under a general act in which "insur- and executed by a form of under- ance" companies were specially ex- writing similar to insurance, gaive eluded. People vs. Kose, 174 111. rise to the same apparent necessity 310; 31 X. E. 246. for legislative regulation which ex- The necessity, however, for regu- ists in the case of insurance, or in lation, and the authority to impose the case of any other financial insti- the regulation under the insurance tution such as a bank or building law, has nothing to do with the con- association, which deals with the tractual relations between the sure- public in a way to warrant some ty and the other parties to the con- COEl'OKATE SURETYSIlll'. 403 The similarity in business methods between insurance com- panies and surety companies has often been noted in the opin- ions of judges, but there is no difference in legal effect between contracts of insurance companies and any other corporation, tract, but is based upon the simi- larity in the methods of doing busi- ness between insurance and Cor- porate Suretyship, and the fact that there is the same need of public inspection and control in order to protect the individuals who do busi- ness with the corporation. Similar comments might properly be made as to a large number of other cases which purport to con- strue insurance Statutes and apply their restrictions and regulations to surety companies. They do not de- cide the suretyship questions in- volved as to the nature of the con: tract relation. ISee also People vs. Fidelity & Casualty Co., 153 111. 25; 38 N. B. 752; People ex rel. Kasson vs. Eose, 174 111. 310; 51 N. E. 246; United ■ States Fidelity & Guaranty Co vs. First National Bank, 233 111. 475; 84 K E. 670; American S^irety Co. vs. Folk, 124 Tenn. 139 ; 135 SI W. 778; People vs. Potts, 264 111. 522, 106 N. E. 524. In American Surety Co. vs. Shal- lenberger, 83 Fed. 636, it was held that iState regulation could not be carried to the extent of fixing pre- mium rates. "In recent years the most in- teresting questions in the law of suretyship have arisen through the advent of the incorporated surety company. The older law assumed that, as between principal and surety, the obligation was gratui- tous, the motive friendship or ex- pectation of reciprocal advantage. While the common law could not unmake the surety's contract, it could take account of his disinter- estedness by permitting him to stand on the very letter nf his agreement; the undertaking of the surety, to use the favorite phrase. being regarded as strictissimi juris. The protection, given to the surety under this rule before equity had ameliorated his lot, was very simi- lar to tha(t given to the priso- ner through the technical interpre- tation of indictments before the reform of the criminal law and is unnecessary in the present state of the law; a guaranty, like other con- tracts, should receive a reasonable construction with a view to ascer- taining and carrying into effect the true intention of the parties. The trend of American decisions is to distinguish between individual and corporate suretyship and to deny favoDS to the latter because the transaction is essentially insurance, undertaken by companies organized to conduct such a business for profit upon terms usually pre- scribed by themselves." Guaranty Co. vs. Pressed Brick Co., 191 U. S. 416; Young vs. American Bonding Co., 228 Pa. 373; Boppart vs. SHirety Co., 140 Mo. App. 675; Champion I. Co. vs. American Bond- ing Co., 115 Ky. 863; Lesher vs. Fidelity Co., 239 111. 502; Phila- delphia vs. Fidelity Co., 231 Pa. 208 s. c. Ann. Caa. (1912) 1085, and note; 64 Univ. of Pa. L. Rev 200; Cowles vs. U. S. F. & G. Co 32 Wash. 120, 98 Ann. S. Ren. 838' 72 Pac. 1032; U. S. F. & G. Co., vs. First National Bank, 233 III 475, 84 N. E. 670; Livingston vs. Fidelity & D. Co., 76 Ohio S. 253, 81 N. E. 330, 66 U. of Pa. Law Review 40, 65; Victoria Lumber Co. vs. Wells, 139 La.' 500, 71 So. 781; Ohio County vs. Clemens, 85 W. Va. 11, 100 S. E. 680; Comev vs. United Surety Co., 217 N. Y. 268, 111 N. E. 832; Wasco County vs. N. E. Equitable Ins. Co., 88 Oregon 465, 172 Pac. 126. 404 THE LAW OF SURETYSHIP. after the meaning of the contract has been determined and the scope defined. The business in which a corporation or individual is engaged does not change the fundamental law of contracts as applied to them. Corporate Suretyship is not a new kind of promise to pay the debt of another. It differs from private suretyship in the fact- that it rests upon somewhat better business methods, the rights involved being more clearly defined by the parties them- selves, leaving a more limited field in which to apply the equi- ties and presumptions of the established law of suretyship. There is a broad distinction between the legal principles which control the performance of a contract after its meaning and scope have been determined and the rules of construction which are applied in determining its meaning. The latter constitutes a preliminary question and is not re- lated in any special way to suretyship. If a rule of strict construction is applied either because the surety prepared its own contract form, or is engaged in the business of suretyship for profit, or because the bond is like an insurance policy, or because the surety is a quasi public cor- poration, or for any other reason, the point is finally reached where the Private and Corporate Surety stand upon the same footing, and are thereafter treated exactly alike, and the courts are in full accord as to this view. Except in Texas, the law every- sistent with the purpose to be ae- where appears well settled that complished, which is most favorable while the contract of an individual to the beneficiary." surety, or voluntary surety as See H. & '9. Engineering Co. vs. spoken of in some cases, will be Turney, 110 Texas 148', 21© S. W. strictly construed and all doubts 621 ; Lonergan vs. Trust Co., 101 and technicalities resolved in favor Texas, 63, 22 L. R. A. (N. S.) of the surety, this rule does not 364; Federal Union iSurety Co. vs. apply in the case of a company Maguire, 111 Ark. 373, r63 S. W. organized for the express purpose 1171; U. S'. F. & Gr. Co. vs. Poetker, of acting as a surety for a compen- 180 Ind. 255, 102 N. E. 372; Ameri- sation. can Surety Co. vs. Pangburn, 182 Indemnity Co. vs. Granite Co., Ind. 116, 105 N. E. 769; Hileman 100 Ohio '9. 373, 126 N. E. 405, vs. Faus, 178 Iowa 644, 158 N. W. expresses the general rule: "Un- 597; Hormel vs. American Bonding like an ordinary private surety, a Co., 112 Jlinn. 288, 33 L. E. A. surety of the character here in- (N. S.) 513, 128 N. W. 12; Phila- volved, which accepts money con- delphia vs. Fidelity & Deposit Co., sideration, has the power to and 231 Pa. iSt. 208, Ann. Cases 1012B, does fix the amount of its premium 1085, 80 Atl. 62; Brown vs. Title so as to cover its financial respon- Guaranty & Surety Co., 232 Pa. St. sibility. This class of suretyships 337, 38 L. R. A. (N. S.) 698, 81 therefore ia not regarded as 'a fav- Atl. 410; Guaranty Co. vs. Pressed orite of the law.' And if the Brick Co., 191 U. iS. 416; U. S. terms of #ie surety contract are F. & G. Co. vs. First National susceptible of two constructions, Bank, 233 111. 475, 84 N. E. 670. that one should be adopted, if con- COEPOBATE SURETYSHIP. 405 To apply a strict construction to a contract against the party- writing it is in no sense a new rule. The frequent references in the reported suretyship eases to the "law of insurance," or the use of the words "corporate suretyship is like insurance" have no meaning, except as they relate merely to the construction of the contract and these rul- mgs have no relation to the proposition sometimes urged, that corporate suretyship is a new and different kind of suretyship. Some of the earlier cases have been misunderstood on this point, but there is no room for doubting the attitude of the courts at this time. "We must keep in view the character of contracts of surety- ship of corporations organized for the purpose of engaging, for profit, in the business of guaranteeing the fidelity or contracts of a third party, and the rules of construction applicable to their contracts. While such contracts in form resemble those of suretyship, they are in fact contracts of insurance, to which the rules of construction peculiar to contracts of suretyship proper do not apply, but to which the rules governing ordinary insurance contracts are applicable. "The rule of construction applicable to a contract of insur- ance, in eases where the Legislature has not prescribed a standard policy, is settled, to the effect that if there is any ambiguity in language or condition, or it is fairly open to two constructions, one of which will uphold and the other defeat the claim of the insured, that should be adopted which is most favorable to the insured. The rule of strict construction against the insurer and the liberal one in favor of the insured must prevail under such circumstances. "If, however, the terms of the 'contract be clear, and not fairly susceptible of two constructions, an ambiguity cannot be assumed, and the plain intention of the party nullified by con- struction. "'" i»Hormel vs. American Bonding Co. vs. Golden Pressed Brick Co., Co., 112 Minn. 288; 128 N. W. 12; 191 U. iS. 416; City of Topeka vs. 33 L. R. A. (N.S.) 513, and note; Federal Union Surety Co., 213 Fed. iLivlngston vs. Fidelity & Deposit 958. Co., 76 Ohio 8. 253, 81 N. E. 330. The case of Bank of Tarboro vs. See also American iSurety Co. vs. Fidelity & Deposit Co., 128 N. C. Pauly, 170 U. S. 133; U. S. F. & G. 406 THE LAW OF SUEETYSHIP. The Supreme Court of the United States, in discussing the construction of suretyship contracts, according to the rule of the law of insurance, has expressed itself thus : "That object should not be defeated by any narrow interpre- tation of its provisions, nor by adopting a construction favor- able to the company, if there be another construction equally admissible under the terms of the instmment, .... but this 3fi6; 38 S. E. 908, goes to the ex- tent of comparing Surety Companies with public service corporations and suggests the name of "common sure- ty" for the purpose of classifying Surety 'Companies with common carriers in their relations to the public, but even -this case deals al- together with the construction of ambiguities and does not rule that corporate suretyship differs in any other way from private suretyship. The Court says : "In its very form and essence the bond before us re- sembles an insurance contract and diflfers materially from the Ordinary forms coming down to us from im- memorial usage. Therefore we must place such bonds in the gen- eral class of insurance policies and construe them upon the same gen- eral principles; that is, most strong- ly against the company, and most favorably to their general intent and essential purpose. . . The defendant has voluntarily become, by virtue of the statute, what may be called a "common surety"; not exactly in tlie nature of a, common carrier, like railroad and telegraph companies, but still, one of those public agencies to which are given unusual powers and which have as- sumed the most sacred responsibili- ties. Permitted by law to act as sole sureties for trustees, guardians, administrators and other fiducia- ries, they are held by the policy of law to the full measure of the re- sponsibility they have voluntarily assumed. They may make such reasonable regulations as are nec- essary for their own protection or the proper transaction of their busi- ness; but suob stipulations will be most strongly construed against % forfeiture oi the indemnity, for which alone the bond is given, and in favor of a fair and equitable con- struction of the essential purposes of the contiaet." To the same effect, see Bryant vs. American Bonding Co., 77 0. S. 90; 82 N. E. 960. "What is the nature of the contract? Is it one simply of suretysliip, — one of those known as voluntary contracts, or is it rather one of the class issued for a money consideration and because of a desire for pecuniary gain? If the former, then it is one wherein the surety is regarded as a favorite of the law and all doubtful ques- tions to be resolved in his favor. If the latter, then he is regarded as an insurer, whose contract, being drawn by the surety himself and for a money consideration, is, it ambiguity exists in the language, to be resolved most strongly against the surety." Indemnity Co. vs. Granite Co., 100 0. S. 373, 126 N. E. 40.5, 12 A. L. R. 378, note at p. 382, "Liability of Surety Company as Distinguished from that of Gratuitous Surety." :S'ee also United American Fire Ins. Co. vs. American Bonding Co., 146 Wis. .573; 131 N. W. 994; 40 L. R. A. (N.S.) 661, which holds: "The bond in question was an in- CORPORATE SURETYSHIP. 407 rule cannot be availed of to refine away terms of a contract expresed with sufficient clearness to convey the plain meaning of the parties and embodying requirements, compliance with which is made the condition to liability thereon."^' There is now to be found an almost uniform acquiescence in the statement of a recent case, in which it is said : "Inasmuch as an indemnitor's liability is one dependent wholly upon the contract, it would be anomalous to hold that he is answerable under conditions directly contrary to the ex- press stipulations of his undertaking. "When he covenants to be bound, provided certain antecedent conditions are complied with for the party indemnified, in the very nature of things, if those conditions are not fulfilled, his liability never becomes fixed. "This is so elementary that we do not pause to cite authority in support of it. G-iving to the bond of indemnity the most lib- eral construction contended for, treating it in point of fact as closely akin to a technical policy of insurance, we can not understand how the indemnitor can be held accountable upon it in the teeth of the explicit covenants that it should not be answerable unless designated provisions distinctly declared to be conditions precedent to the validity of the bond have been first complied with. "^'^ The reported cases indicate that the only important innova- tion thus far made by the courts in construing corporate surety contracts relates wholly to the method of determining the mean- ing of the language employed in making the contracts: "It is now well settled that the bond of a Surety Company, like any other insurance policy, is to be most strongly construed against the insurer. demnity contract entered into by the '^^ Guaranty Co. of N. A. vs. Me- defendant for a money conaidera- ehanics Savings Bank St, Trust Co., tion. It has all the essential fea- 183 U. S. 402. See also Granite • tures of an insurance contract and Building Co. vs. Saville, 101 Va. 217 ; should be subject to the rules of 43 S. E. 351'; U. S. F. & G. Co. vs. construction applicable to such con- Overstreet, 27 K. L. R. 2l4i8; 84 S. tracts. It is apparent that the bond W. 764. sued on was prepared by the de- 1" Union Central Life Ins. Co. vs. fendant. As to any ambiguity U. S. F &i G. Co 99 Md. 423; 58 therein, the provision;, conditions :^tl.437. iSee also United States and exceptions of the bond which f^^^eMy ^ a.d ^Guaranty ^ Co. ^^v^. tend to work a forfeiture should be j^^^^^ ^^_ -g. S. Fidelity Co., 239 construed most strongly against the ^^ 502, 88 N. E. 208 ; ante, Stec. party preparing the contract." 73 note 2. 408 THE LAW OP SURETYSHIP. ' ' The language of the bond is that selected and employed by the insurer and when doubtful or ambiguous must be given the strongest interpretation against the insurer which it will reasonably bear. "^'' §234. Private and corporate suretyship compared. Private suretyship is generally for mere accommodation. Corporate Suretyship is a business transaction for profit. Many instances are likely to arise, however, where private persons engage in suretyship for compensation. The private professional surety who takes up the business for profit was the forerunner of the surety company, and many are still thus engaged. It IS also quite possible for a Corporate Surety to furnish a bond gratuitouslj'. The comparison in these respects therefor, of itself, involves no necessary difference in the legal attitude of the private and corporate Surety. The important practical contrast between these forms of sure- tyship is in the language of the contract and the methods of arriving at a mutual understanding, involving at most an in- quiry as to the meaning of the words employed. The private surety who engages in a fidelity bond, or who executes a letter of credit, or a guaranty against a failure of title, or obligates himself upon a judicial or official bond, usually has nothing to do with the making of the contract. He takes little if any thought of the possibility of loss, frequently signing without reading, and generallj' having only a vague under- standing of the scope of the engagement, beyond the fact that it is a bond of some sort. The law, by its carefully considered precedents, has devel- oped the rules for the determination of the respective rights and liabilities of the parties who contract in this way, making provi- sion for certain defenses in suretyship, such as those resulting from fraudulent concealment, material alteration of the contract, extension of time to the principal and other equitable defens'es impressed upon the contract, without any specific reference in the contract to such possible defenses. The law also provides for the remedy of contribution between sureties and the rights of indemnity and subrogation. 1(2 American Bonding Co. vs. Mor- at page 1087; Indemnity Co. vs. row, 80 Ark. 49; 96 S. W. 613; Granite Co., 100 0. S. 373, 126 N. E. Philadelphia vs. Fidelity & D. Co., 405, 12 A. L. R. 378, and note p. 231 Pa. 208, 80 Atl. 62, Ann. Cas. 382. 1SH2B, 1085, and cases cited in note COEPOEATE SUEBTTSHIP. 409 On the other hand the Corporate Surety, except where the form of the contract is prescribed by law, such as some kinds of judicial and official bonds, usually prepares its own contracts, carefully and distinctly defining its rights and liabilities, and in many instances requiring applications to be signed as a prelim- inary to the bond, wherein the principal and obligee unite in written representations, which become conditions upon the lia- bility recited in the bond, and also setting out in the bond itself the rights and privileges which the law affords to private sure- ties, such as the privilege of subrogation, and stipulations against fraudulent concealment of facts by the obligee which materially affect the risk, which rights and equities could also be claimed by the Corporate Surety even though not set out in the contract. The relative legal position of the Private and Corporate Surety is not therefore changed by the fact that the one sets out in its contract the same legal rights which the law imports, even if, as in the case of an accommodation indorser, the contract is evi- dence only by a signature in blank, except that if the language of the contract is ambiguous it will be strictly construed against the Corporate Surety by resolving all doubts in favor of the beneficiary.^^ If the Private and Corporate Surety each set out the same conditions in their contract, and each fortify themselves by the same preliminary conditions by a written application for the bond, it is clear that the resulting liability is identical in all re- spects, without regard to the fact that one is corporate and the other not, or that one is compensated and the other gratuitous. The advantage to all parties and to the courts where the rights of the contracting parties are fully and accurately set down in writing, is manifest, but the legal position of the parties is not thereby changed. §235. Corporate suretyship and insurance compaied. Insurance is properly comparable with Corporate Suretyship in the sense that it is a business of a quasi-public character and is controlled and regulated by statutes: Insurance, however, lacks the essential element which dis- tinguishes suretyship from a simple contract. There are three parties to a suretyship contract, and only two in an insurance contract. leAwte, Sec. 233. 410 THE LAW OF SURETYSHIP. The promise by one party to answer for the default in the per- formance of a subsisting contract of another person is the par- ticular feature which gives rise to all the learning in the field of suretyship law. Insurance is a simple contract of indemnity between two per- sons, wherein one agrees to compensate the other against loss which results, not because of the breach of the contract of an- other person, but which arises from an involuntary impersonal cause, such as accident, fire or death. There is not even a fair ailalogy to be drawn between the two kinds of contract. The comparison between a suretyship eon- tract and an insurance contract is precisely the same as that which exists between a suretyship contract and any other form of simple contract. The subject of suretyship arises altogether out of the rela- tion of the promisor, principal and creditor, brought together in one contract, and where this relation exists the rules and equities of suretyship can not be excluded.^' Corporate suretyship as affected by the premium or com- pensation paid. It has sometimes been assumed that the payment of a prem- ium to a Surety Company in some way deprives the Surety if Ante, 'See. 233. "The rule of strict construction," it is said in a recent case, "is liable at times to work it practical injustice and it ought not to be extended beyond the reason for the rule, particularly when the surety is engaged in the business of becoming surety for pay and presumably for profit." It may be questioned whether compen- sation is a proper criterion for discriminating between agreements where th'e strictissim/i, juris rule is sought to be applied. If the con- tract is based on an elaborate questionnaire and is for all prac- tical purposes an insurance policy, it should be ao treated. But, where the contract of the com- pensated surety is not essentially different from that of the gratuitous surety, the same rules of interpre- tation should be applied to both, based on a fair and reasonable con- struction of their respective obliga- tions. The distinction is, no doubt, in part due to a reluctance to admit that the rule of strictissimi juris has little justification in modern law and may prove the entering wedge for' its repudiation. iSurety companies it is needless to say are a convenience to the public; it is important that they continue sound and that their rates be as moderate as is commensurate with the risk, and the risk will be lessened by a wise, consistent, and uniform ad- ministration of the law of guaranty in all cases. St. John's College vs. Aetna Indemnity Co., 201 N. Y. 335." 66 U. of Pa. Law Review 40, 65; George A. Hormel & Co. vs. American Bonding Co., 112 Minn. 288, 128 N. W. 12, 33 L. R. A. CN. 19.) 513; Gamble-Robinson Co. vs; Mass. Bonding & Ins. Co., 113 Minn. 38, 129 N. W. 131; Shak- raan vs. U. S. Credit System, 92 Wis. 366, 53 Am. St. Rep. 920, 66 N. W. 528, 32 !L. R. A. 383. holding that the surety company was bound under the rules of the insurance statute, and that the husi- ness was insurance, but does not decide whether the contract was suretyship and controlled by the rules of suretyship law. CORPORATE SURETYSHIP. 411 of rights and privileges which are enjoyed by a private Surety acting wholly for accommodation." The payment of a premium will not of course deprive the surety of any of the provisions expressly contained in the con- tract, and it has never been urged that because of the receipt of the premium the surety was thereby deprived of his right of indemnity contribution or subrogation, or any of the usual de^ fenses of suretyship such as alteration of the contract, extension of time, or fraudulent concealment of facts material for the surety to know in estimating the risk."" The oases which maintain the view that Corporate Surety- ship is insurance because of the fact that a premium is paid, make no logical connection between that fact and the judgment rendered. The pt-emium is less a consideration of Corporate Surety- ship contracts than of Insurance contracts. In the latter case it is the sole consideration. It is doubtful whether it is proper to denominate the prem- ium as a oonsideration at all in a suretyship contract. It cer- tainly is not the sole consideration. In a great majority of the contracts written by Surety Companies, the premium is paid and contracted for by the principal, while the bond or obliga- tion runs to the creditor. The surety cannot evade the liability to the creditor because the principal fails to pay the premium, neither can the contract be revoked on tliat account.^ - Walker vs. Holtzclaw, .>7 S. C. not be considered in determining 450: 3d S. E. 754. "Upon the hear- his rights." See also Baglin va. ing of the case it was argued that a Southern Surety Co., 4:1 App. D. surety is a favorite of the law, and C. 530. it (the policy) should be strictly sA surety company can avail it- construed in his favor. While this self of the provisions of Statute, amd is true as a general rule, it has no vrithdraw from judicial and official application to a case like this, where bonds in cases v\4iere good cause ia the surety receives compensation shown, and it is held that the fail- and the suretyship is in the line of ure to pay the premium is a good its regular business." ground for extending the relief . af- 2a Lewis Admr. vs. United .States forded by the Statvite, but such Fidelity and Guaranty Co., 144 Ky. remedy is not based upon a failure 435; 13.8 S. W. 305. "We are cited of the oonsideration, but rests in the to no authority from any court of discretion of the court and will be last resort denying to a surety the applied as a protective measure in right to subrogation because he was faTor of a coi-porate surety, a compensated or paid surety. Sub- Amer. Surety Co. vs. Thurber, H62 rogation is allowed because the surety N. Y. 2i44; 56 N. E. 6311. "Surety has paid the debt of his principal. companies are a convenience to tbe Upon this ground the right rests. community, and it is important that The question as to what induced the they should continue, sound and able surety to assume the obligation can to respond to their obligations. The 4:12 THB LAW OF SURETYSHIP. The consideration in all suretyship contracts, whether com- pensated or not, springs from the contract between the principal and creditor. If employment is offered upon the condition that the employee shall furnish a bond to cover the faithful perform- ance of his duties, the consideration of the employment con- tract is the consideration of the bond, and as to the question of consideration it is of no importance whether the surety is com- pensated or not, A premium paid is the bonus or inducement to the Surety Company, but is not the essential consideration out of which the contract grows. ^237. Corporate compensated suretyship is within the statutes of frauds. The contract of the surety corporation although compensated is within the very letter of the Statute of Frauds. It is a col- lateral promise to pay the debt or answer for the default of another, and will not be binding unless in writing. Where the surety is beneficially interested in the carrying out of the main contract, as where the performance of the main contract subserves a pecuniary purpose of his own, his collateral engagement to answer for the due performance of the principal contract is considered outside the provisions of the Statute of frauds and constitutes him an original promisor.* legislature doubtless intended to its offieexs it may inform those in- promote their stability by extend- terested, and request action on their ing the same protection to them that part; but if they reply, 'You are it extends to other sureties. The good and we are safe,' what relief is contracts of such companies are there unless it is under this section? usually based upon an annual prem- If it cannot induce those ultimately ium for a continuing bond. If the entitled to the money or property to premium were not paid after the act, its condition is hopeless and first year and the company could bankruptcy may be the result." not avail itself of the privilege of See also Amer. Surety Co. vs. Nel- the statute, its responsibility would son, 77 Minn. 402; 80 N. W. 300. continue with no compensation, as Where it was held that a failure by the bond would still be in force. No an assignee to pay the stipulated company can do business on such premium to the surety company exe- a basis. Moreover, if the annual cuting his bond was ground for his premiums are paid, but the principal is squandering the estate, how can 4 Ante, See. 32. See "Oral Con- the surety protect itself? Through tracts of Fidelity Guaran^," 24 removal. 4 Ante, tracts o: Case and Comment 42 (191?). COEPOEATE SUEETYSHIP. 413 But the payment of a premium as an inducement to ente? into a suretyship contract does not constitute a novation, as the surety on this account derives no interest in the outcome of the main contract which he secures. §238. Construction of corporate suretyship contracts. The doctrine that a surety is a favorite of the law largely disappears in the construction of corporate suretyship con- tracts. This results not from the fact that the surety is a cor- poration and compensated, but because of the form of the con- tract and the manner of its execution. The same rules of construction must also apply to private accommodation suretyship contracts if made in the same way. The importance of the so-called doctrine of " favoritism " as applied, to promises in suretyship is apt to be considerably over-estimated, and has been talked about in many cases where the question is not at all involved. The rule that the surety's liability will not be extended by verbal conditions, or that the term of his contract cannot be changed without his consent, or that one party to the contract cannot be released without releasing the other, applies also to any written instrument. The common expression in construction of ordinary surety- ship that " A surety cannot be bound beyond the clear and un- equivocal terms of his obligation" is true of a party to ajiy contract in writing. There is after all but a very limited field for the application of the doctrine that the surety is a favorite in the law. He clearly is not a favorite, even though so called, where he is merely given the benefit of rules of construction common to all written con- tracts.° s Ulster Co. Savings Inst. vs. terpreted by the same rules which Young, 161 N. Y. 23; 55 N. E. 483. are applicable to the construction of " The liability of a, surety is other contracts. The extent of his measured by his agreement, and is obligation must be determined from not to be extended by construction. the language employed when read His contract, however, is to be in- in the light of the circumstances 414 THE LAW OF SUKETTSHIP. Willie these rules of construction are a part of the general law of suretyship they do not constitute its distinguishing features. The great field of special construction in favor of the surety arises from the fact that he is an accommodation party and generally takes no part in the writing of the contract, and the matter being wholly separate and distinct from his own affairs, he gives the business no attention and relies for his pro- tection on thfa rules of strict construction being applied in his favor, if any doubt arises as to the meaning of his contract And where the language employed is hastily and loosely written, and the contract prepared for the surety is so constructed that different interpretations may reasonably be given to it, the one imposing a limited liability and the other a more extended or continuing liability, the rules of suretyship will generally im- pose the more limited construction. But any contracting party, whether a private or corporate surety acting Math or without compensation, whether a party to an insurance contract or a simple written contract of any soirt, is estopped from claiming any special construction of am- biguous words which he himself has written, as against any reasonable construction acted upon by the other parties to the contract, and the application of this very self-evident propo- sition to the business of corporate suretyship, where the eon- tract is drawn by the officers and agents of the surety, and hedged about by the conditions and requirements of the applica- tion for the bond, has changed the attitude of the surety to the contract, and made unnecessary and improper any rule of strict construction in favor of the surety. It is upon this point that the cases turn which are said to support the view that the compensated corporate surety is not a " favorite " in the law, and that the business on this account is like insurance, and that the rules of private suretyship do not apply. And so in an action upon a fidelity bond executed to a bank surrounding the transaction. Hence, no difference between the contract where the question is as to the of a surety and that of a principal meaning of the language by which or other party sustaining a differ* the party has bound itself, there is ent relation." CORPORATE SURETYSHIP. 415 it was held "if, looking at all its provisions, the bond is fairly and reasonably susceptible of two constructions, one favorable to the bank and the other favorable to the Surety Company, the former, if consistent with the objects for which the bond was given, must be adopted, and this for the reason that the instru- ment which the court is invited to interpret was drawn by the attorneys, officers or agents of the Surety Company As said by Lord St. Leonards, "It (a life policy) is of course prepared by the company and if therefore there should be any ambiguity in it, it must be taken, according to the law, most strongly against the person who prepared it."" The trend of all our modern decisions. Federal 'and State, is to distinguish between Individual and Corporate Suretyship, where the latter is an undertaking for money consideration by a company chartered for the conduct of such business, in the one case the rule of strictissimi juris prevails, as it always has ; with respect to the other, because it is essentially an insurance against risk, underwritten for a money consideration, by a corporation adopting such business for its own profit, the courts generally hold that such a company can be relieved from its obligation for suretyship only where a departure from the contract is shown to be a material and prejudicial variance.*" 6 Ante, Sfec. 233. American iSurety Co. vs. Pauly, 170 U. S. 133; 18 S. Ct. 552. iSee also iS'upreme Council vs. Fi- delity & Casualty Co., 63 Fed. Rep. 48. "The bond is in the terms pre- scribed by the surety, and any doubtful language should be con- strued most strongly against the surety, and in favor of the indem- nity which the assured had reason- able grounds to expect." To the same effect see Bank of Tarboro vs. Fidelity & Deposit Co., 128 N. C. 366; 38 8. E. 908. "The defendant again insists that it should have the same right to limit its liability as is possessed by an individual. That may be; but no member of this Court has ever seen or heard of a bond in such a form being tendered by a private surety. In its very form and es- sence, the bond before us resembles an insurance contract, and differs materially from the ordinary forms coming down to us by immemorial usaffe. Therefore, vre must place such bonds in the general class of insurance policies, and construe them upon the same general princi- ples; that is, most strongly against the company and most favorably to their general intent and general purpose." The foregoing vievr that the con- tract of the surety company is to be construed like an insurance contract most strongly against the insurer, results in this case wholly from the form of the contract wherein the details of every right of the surety are fully set out in the vn-iting, and is in no respect a deduction from the fact that the surety is corporate and compensated. A private surety making the same contract would be subject to the same ruling. 6i Philadelphia vs. Fidelity & D. Co., 231 Pa. 208, 80 Atl. 62, Ann. Cases 1912B, 1085, 1087; Brown vs. Title Guaranty and iStorety Co., 232 Pa. 337, 81 Atl. 410; Young vs. American Bonding Co., 228 Pa. 373, 77 Atl. 623; Philadelphia vs. Rav, 266 Pa. 345, 109 Atl. 689; M. E. Church of Franklin vs. Equitable S'uretyCo., (1921) 269 Pa. 411, 112 Atl. 551 ; New Haven vs. National Steam Economizer Co., 79 Conn. 482; Guaranty Co. vs. Pressed Brick Co., 191 U. iS, 416. 416 THE LAW OF SURETYSHIP. The doctrine thus stated would apply with equal force if the bond had been prepared and executed in the same way by a private surety acting without compensation. From whatever point of viejv the question is considered there does not appear to be any good reason for holding that the fact of the surety being corporate and compensated has any bearing upon the contractual relations of the parties. Where the instrument is not drawn by the surety but is pre- scribed by the law, such as bonds of public officers or judicial bonds, no distinction in principle exists between private and corporate suretyship, and no distinction has been made by the courts in construing the respective contracts, and the only dis- tinction heretofore made by the courts between corporate and private' suretyship contracts, apparently has been limited to the fact, that in the one case the contract is prepared by the surety, and in the other not, resulting in the rule of strict construction against the Corporate Surety in the matter of the interpreta- tion of the meaning of the contract."'' §239. Surety company bonds as affected by the special stipTila- tions inserted for their protection in the contract. Many of the conditions and stipulations common to surety company bonds or policies impose limitations upon the liability of , the surety which would not be implied by law, if such con- ditions were not written in the contract. Considerable dis- cussion has arisen as to whether these stipulations made by the surety company in their own interest can be applied so as to work a forfeiture of the bond, where the limitation in terms narrows the liability imposed by law in the case of an ordinary surety. The view which now prevails as announced by the courts in the later cases establishes the undoubted policy of applying such construction as will prevent a forfeiture of the bond, on ac- count of stipulations which are so worded as to render it nearly impossible to make a claim against the surety company, and at the same time comply with the conditions. Where the object to be attained in giving bond has been carried out, it is deemed against public policy to so construe a eondition in the bond as to give the surety, and the principal whose contract he secures, all the benefits of the arrangement without imposing the burdens. Contra — In California, a corpor- First Congregational Cimreh of ate surety stands on the same foot- Christ in Corona vs. Lowery, 175 ing as an individual surety in this Cal. 124, 165 Pac. 440. regard, and is discharged by a ^^ Ante, Sec. 233. material alteration in the obliga- Oity of Topeka vs. Federal Union tion of the principal, to which the Surety Co., 213 Fed. 958, at page corporation surety does not consent. 962, cites all leading cases. CORPORATE SURETYSHIP. 417 While it is true that where the parties to an agreement have the proper contractual capacity, they will in the absence of fraud or mistake be bound by all the terms of their agreement notwithstanding these terms are much more favorable to one party than the other, yet the law will not sanction a design on the part of one party to so frame his agreement that by its own terms it furnishes an opening for a complete evasion of liability. The general purpose of suretyship being expressed in the bond, the eomman law liability of a surety wiU be enforced, and no mere technical evasion or forfeiture will be tolerated upon the theory that the benefiiciary of the bond has spe- cifically contracted for a forfeiture. But any condition, clearly expressed and not opposed to public policy is valid and will be enforced."* §240. Same subject— Stipulation that the obligee shall notify the surety of any act of the principal that "may" in- volve loss upon the bond. The law of suretyship gives to the promisor a right of notice of default even though not made a stipulation in his contract, whenever such notice is necessary for his protection, as in the case of a commercial guaranty where the facts upon which his liability rests are not within his knowledge, or depend upon the creditor's option.'' So too a stipulation for notice of default under any circum- stances will be binding upon the creditor as it is a condition of liability which may always be imposed.'" But the stipulation for notice of any act of the principal or any facts within the knowledge of the obligee which "may" lead to default and loss to the surety, if not in every case an impossible condition, is in all cases an evasive one and will not be enforced. It puts upon the ob- ligee not merely the duties of observing closely the conduct of the principal, but in addition thereto, charges him with 8'' Livingston \"s. Fidelity and De- ualty Co., 98 Ky. 558 ; 33 S. W. posit Co., 76 O. S. 253 ; 81 N. E. 3i30 ; 828 ; United iStates Fidelity & Guar- Issaquah Coal Co. vs. United States anty Co. vs. First Nat. Bank 233 Fidelity & Guaranty Co., 126 Fed. HI. 275, 84 N. E. 670; Title Guar- 89; Adeliberg vs. United States Fi- anty & Surety Co: vs. Schmidt, 213 delity & Guaranty Co., 90 N. Y. Fed. 199; Baglin vs. Southern Supp. 465; Union Central Life In- Surety Co., 41 App. D. C. 530. suranee Co. vs. United States Fi- ''Ante, Sec. 68. delity & Guaranty Co., 99 Md. 423; ,/"!", School District vs. The 58 Atl. 437- Dorsey vs Fidelity & Massachusetts Bonding Co., 92 Ran. Casualty Co., 98 Ga. 456; 25 S. E. ^3, it was held that this condition S21; Sinclair vs. National Surety would not be enforced in the absence On 139 la 549- 107 N \^' 184 • °* P''""* *"^* ™^ surety company De ' Jernette vs. Fidelity' and Oa^ ^^s injured by lack of such notice. 418 THE LAW OF SUEETYSIIIP. the duty of determining the character of the acts of the princi- pal, and the probability that a line of conduct apparently inno« cent may be fraudulent. Such facts although giving rise to sus- picion need not be communicated. ° Where an agent of an insurance company was required by his contract to remit payments of money collected within a certain time after the close of each month, it was held that while his failure to do so might be reasonable ground for a suspicion tliat he was in default, yet the insurance company was not bound to put such construction upon the act, and a failure to report this fact to the surety company was not a violation of the stipu- lation in the bond requiring notice of all acts of the principal which may involve loss on the bond.' The rule relieves the obligee from the responsibility of bad judgment in estimating the effect of the act which finally leads to the less charged against the bond. It cannot, however, be extended so as to relieve the obligee from the duty of giving Inotice of specific acts stipulated in the bond, although the » American Surety Co. vs. Pauly, words ' which may involve loss ' in 170 U. S. 133; 18 S. Ct. 552. the above extract from the bond. In the lower court the jury was But when those words are taken charged, " You are to inquire first, with the words in the same sentence when it was that the plaintiff be- ' as soon as practicable after such came satisfied that the cashier had act shall have come to the knowledge committed dishonest or fraudulent of the employer,' it may well be acts which might render the de- held the Surety Company did not fendant liable under this policy. He intend to require written notice of may have had suspicions of irregu- any act upon the part of the cashier r larities ; he may have had suspi- that might involve loss, unless the cions of frauds but he was not bank had knowledge, not simply sus- bound to act until he had acquired pieion, of the existence of such facts knowledge of some specific fraudu- as would justify a, careful and pru- lent or dishonest act which might dent man in charging another with involve the defendant in liability fraud and dishonesty." for the misconduct." See also Bank of Tarboro vs. Fi- The Supreme Court in approving delity & Deposit Co., 128 N. C. 366; this charge said: "We perceive no 38 S. E. 908; ^tna Life Ins. Co. vs. error in these instructions. They Amer. Surety Co., 34 Fed. Rep. W-1; are entirely consistent with the Fidelity & Guaranty Co. vs. Wesftera terms of the contract. Much stress Bank, 29 Ky. L. K. 639; 94 S. W. 2. was laid, in argument, upon the » Pacific Fire Ins. Co. vs. Pacifio Surety Co., .9'3 CaJ. 7; 28 Pac. 842. COEPOEATE SUEETYSHIP. 419 obligee in good faith considered such acts of no importance and as involving no risk. The federal supreme court in construing a bond containing the condition " the employer shall at once notify the company, on his becoming aware of the said em- ployee being engaged in speculation or gambling," held that the failure of the employer to notify the surety company that he had received such information was a breach of the bond, al- though the employer believed that the principal had ceased to gamble, and that notice to the surety would be of no impor- tance.'" The condition usually recited in surety company bonds re- quiring the obligee to notify the surety promptly of any act of fraud or dishonesty on. the part of the principal is intended to extend the common law obligation resting upon the beneficiary of a bond. The private surety whose contract contains no stip- ulation requiring him to report to the surety as to the conduct of the principal, is deemed guilty of bad faith towards the surety if he continues the principal in his employ, without notice to the surety, after he has knowledge of acts of fraud and dishonesty which increase the peril on the bond, but he does not by implication assume any responsibility of watching the principal in the interest of the surety.'"^ 1° Guarantee Co. of N. A. vs. The had admonished it of the probability Mechanics Savings Bank & Trust that speculation or gambling would Co., 183 U. S. 402. lead to acts involving loss for which Reversing The U. S. Circuit Court it would be responsible. .... The of Appeals, 80 Fed. Rep. 766. provisions intended to protect the Fuller, C. J. : " The company's company in this case were not in defense did not rest upon the duty of themselves unreasonable and so far diligence growing out of the rela- as they operated to compel the bank tion of the parties, but on the breach to exercise due supervision and ex- of one of the stipulations entered amination, and due vigilance, were into by them. The question was not consistent with sound public policy, merely whether the conduct of the We think it was the duty of this bank was contrary to the nature bank to have made prompt investiga- of the contract, but whether it was tion, or at all events to have notified not contrary to its terms. Engage- the company at once of the Informa- ment in speculation or gambling tion that it had." was what the company sought to n Ante See. 107. guard against because experience 420 THE LAW OF SURETYSHIP. It is held that these provisions do not enlarge the duty of the ohligee where no special stipulation is made for the exercise of diligence in supervising the conduct of the principal, and that the covenant that the obligee shall at once notify the surety of any act of fraud or dishonesty on the part of the principal, only covers such acts as are actually known to the employer, and not those who might have known by the exercise of diligence.^'' §241. Stipulations discharging surety if claim is not made within a designated time. In ordinary suretyship the creditor is entitled to assert his claim at any time within the Statute of Limitations. The business of compensated suretyship cannot, however, be successfully conducted without a more definite and timely de- mand being made, to enable the corporation to properly adjust its affairs, by anticipating the claims that are to be made upon its resources. The limitation in the contract requiring proof of loss to be filed within a designated period, and an action to be brought within a definite time, is a valid condition, and a failure to com- ply with this requirement is a waiver of all right under the bond, and will prevent a recovery.^" 12 Fidelity & Casualty Co. vs. Gate otherwise was it under any duty to City Nat. Bank, 97 Ga. 634; 25 S. E. the company; and then it was only ono r 7 ■ T "Tu 5= „„+ „ required to notify the company of 392, LumpUn, J.: There is not a ^^^^ j^ j,^^ ascertained." syllable in the contract, however, 13 California Savings Bank vs. bearing the construction that the Amer. Surety Co., 87 Fed. Rep. 118. bank should exercise any degree of The numerous authorities validat- .... . .... _ ins similar provisions in insurance diligence in enquiring into or super- ^^^t^^^ts support .the rule in princi- vising the conduct of Eedwine in or- pjg j^g applied to corporate sureties, der that the company might be saved Insurance Co. vs. McGookey, 33 0. S. from loss through his misconduct. 555; Quinlan vs. Insurance Co., 133 mi, V 1 j-j 4. J + 1 + „^ N. Y. 356; 31 N. E. 31; Eiddlesbar- The bank did not undertake to ex- ^^ T„;„,ance Co.. 7 Wall. 386; ercise reasonable care and diligence j^sher vs. U. IS. Fidelity Co., 239 to find out if Eedwine had become 111. 502; 88 N. E. 208; Lyons vs. untrustworthy, but as to this matter Nat. Surety Co., 243 Mo. 607; 147 the company, in effect, invited the l,,^,"!^,^^™^! «^f^f,°: ^3 bank to repose in peace, for it guar- ,g^ g ggj . Lombard Investment Co. anteed that Eedwine would remain vs. Amer. Surety Co., 65 Fed. 476; honest and faithful. Only after Ladies of Maccabees vs. Illinois knowledge had actually come to the Surety Co., 196 Mieh. 27; 163 N. bank that he was or had become W. 7. COEPOEATE SUEETYSHIP. 421 But such condition will not be enforced where the delay is unavoidable. Thus in a case where a bond was given to a Bank insuring the Bank against loss from the dishonesty of its offi- cers, and the Bank examiner took possession of all the books and assets of the Bank, so that although the Receiver gave imme- diate notice to the surety company of the default of the princi- pal, yet he was prevented from making proof of loss within the limited period by reason of not being able to get access to the books of the Bank. It was held that limitations in this form of contracts would not be applied with the same strictness as Statutes of Limitation, and that where the performance is ren- dered impossible by the act of the government or the courts, that the right to file the proofs, and bring the action will be ex- tended." §242. Stipulation that the amount paid by surety upon the bond shall be conclusive against the principal in an action by the surety against the principal for indemnity. The surety cannot enlarge the ".ommon law right of indemnity by stipulations in the contract The principal owes to the surety the duty of full protection, and whether the suretyship is gratuitous or compensated, the principal is bound to reim- burse the surety for all moneys paid by the surety upon the ob- ligation of the principal to which the suretyship is collateral. If the bond in terms stipulates for such indemnity, it adds nothing to the right which the surety enjoys without such cov- enant Where it is stipulated that any voucher which may be execut- ed to the surety for money paid in settleonent of claims made upon the bond, shall be conclusive of the amount due in an ac- tion for indemnity against the principal, the common law right of indemnity is thereby enlarged, as the amount recoverable is no longer the amount due as shall be ascertained by judicial determination, but such sum as the surety may pay to the cred- itor, whether more or less than the sum due. >« Jackson vs. Piilclity & Casualty Co., 75 Fed. Rep. 359. 422 THE liAW OP SURETYSHIP. Such provision in the contract is void on grounds of public policy. Upon this question it was held "The right of a party to waive the protection of the law is subject to the control of public policy, which cannot be set aside or contravened by any arrangement or agreemeut by the parties, however expressed. Thus an agreement to waive the defense of usury is void. So also, according to the weight of authority, is an agreement, made at the time of contracting a debt, to waive the prospective right of exemption. The agreement under consideration is more than a mere enlargement of contractual rights, or the es- tablishment of a rule of evidence. It provides that the plaintiff may be his own ex parte acts, conclusively establish and deter- mine the existence of his own cause of action. In short, he is made the Supreme Judge of his own case. The case is not at all analogous to the common provisions in building and con- struction contracts, by which the determination of some third person such as the architect or engineer, as to the amount and character of the work, is made conclusive between the parties, in the absence of fraud or mistake. Nor is it at all analogous to a provision in an executory contract for the sale or manufac- ture of an article to the satisfaction of the buyer, where, if the article is declined, the parties are in contemplation of the law left in statu quo. In the present case the attempt is to pro- vide that, after the alleged cause of action has accrued, the plaintiff shall be the sole and exclusive judge of both its exist- ence and extent. Such an agreement is clearly against public policy. "1^ §243. Contract of the compensated surety valid only as a col- lateral undertaking. The compensation received by the corporate surety as the inducement for its undertaking is not of itself sufficient to make the transaction a binding obligation in suretyship. There must be a valid subsisting principal obligation to which the surety's 15 Fidelity & Casualty Co. vs. Aetna Indemnity Co., App. Div. N. Eiehhoff, 63 Minn. 170; 65 N. W. Y.; 108 N. Y. Supp. 171 (surety 351; Fidelity & Casualty Co. vs. bond); American iSurety Co. vs. Grays, 76 Minn. 450; 79 N. W. 531. Pauly (followed) ; American ISurety A contract to accept the oath or Co. vs. Pauly, 170 U. S. 160 (surety- certificate of a third person as eon- contract, providing that "a written elusive evidence has generally been statement of such loss, certified by held valid. The early En!;lish pre- the duly authorized officer or repre- cedents show this principle applied sentative of the employer, based to the obligee's proof of the prin- upon the accounts of the employer, cipal's default in suing the surety shall be prima facie evidence on a bond of indemnity. thereof"; held valid; that there was The following' American cases, "nothing extraordinary or startling" holding valid a clause making a in this agreement) . 16 Illinois Law third person's statement prima faoie Review 87, 102 to 107; 5 Minn. Law evidence only give no difficulty: Review 227, 480; 21 Columbia Law (1908)— Security M. L. Ins. Co. vs. .Review 192. COEPOEATE SUEBTYSHIP. 423 contract is collateral, otherwise the undertaking that another ■will perform an act which he has no obligation to perform, coupled with an agreement to pay a penalty if he fails to do the thing specified, is a mere wager. The corporate' surety sustains the same attitude to this indis- pensable element of suretyship as in the case of the private surety. The surety is not concerned with the extent and value of the main contract, as to whether it is profitable or otherwise to the principal contractors, or whether it is a fair and equitable bar- gain, or whether the apparent obligee is the real party in in- terest The important thing, and the only point necessary to be determined in fixing the liability of the surety, is whether it is a binding obligation, and if not, the surety will not be held to his engagement even though he has been paid a premium. Some useless confusion of ideas arises in this connection be- cause of the persistency with which the contract of the corpor- ate surety is sometimes called " insurance," from which is de- duced the erroneous notion that the obligee in the bond must have an " insurable interest " in the transaction as a basis of recovery, and is limited in his recovery to the amount of such insurable interest. The insurable interest known to insurance has no necessary relation to contract rights. One may have such interest in property he does not own, but out of which he expects to derive some benefit, and the loss of which would cause him damage; or he may have an insurable interest in the life of another, even though such interest does not arise out of any contract. But a suretyship relation arises only out of a con- tract relation, and it depends upon the existence of a main con- tract to which the promise is collateral. The more accurate use of terms would seem to be that no recovery can be had against a corporate compensated surety, except where the cause of ac- tion exists against the principal also, and the amount of recov- ery is limited to the amount of the liability against the principal on the main contract, and the doctrine of " insurable interest " as defined in insurance law has nothing to do with the case. This familiar rule of private suretyship was applied to a con- 424 THE I/AW OF SURETYSHIP. tract of compensated surety, in a case where tHe bond was to^ secure the fidelity of an agent, who was employed by a foreign corporation to carry on its business under a contract that was void because of the failure of the corporation to comply with the laws of the state, and the main contract not being enforce- able, the surety company was also released.^" §243a. Joint central of trust funds. The stipulation in surety bonds that trust funds shall be deposited in a bank named by the surety and drawn out only upon cheeks countersigned by the surety, so far as it applies to trusts created by law, Such as receivers, administrators, guardian, assignees, or any trustee appointed by the Court is against public policy and void. An officer of the Court is chargeable with the custody and control of all property coming to him as such officer and has no authority to delegate this control to another. The ruling in England and the United States upon this subject has been stated thus: "A receiver cannot be permitted to enter into any agree- ment with his sureties by which he in effect indemnifies them against any loss that may accrue from his dealing with the receivership fund. The security for his good conduct must not be worked out of the estate itself. Nor can he be per- mitted to put the fund entrusted to his care under their con- trol, or the control of any person appointed by them, but must retain the complete control over it in himself, so as to be able to act with promptitude on any emergency."^' 16 MdCanna & Eraser Co. vs. Oiti- pacity, and it was held that since zens' Trust & Surety Co., 74 Fed. there was no subsisting obligatioin Rep. 597. running to him as an individual 'See also Electric Appliance Co. that the collateral undertaking of vs. U. S. "Fidelity & Guaranty Co., the surety must be discharged. The 110 Wis. 434; 85 N. W. 638; Amer. holding in this case is not affected Surety 'Co. vs. United States, 127 by the fact that the surety was Ala. 3419; 28 Soutli. 664. coriwrate and compensated, but the Fidelity & Deposit Co. vs. Singer, ruling applies to anv surety. SO Atl. Rep. 518. In this ease the i' White vs. Baugh, 3 Clark & F. action was in replevin, and the bond 44, 9 Bli^h N. R. 181. See also was made to Singer in his individual Fidelity & Denosit Co. vs. Butler, capacity, whereas the title to the 130 Ga. 225, 60 8. E. Sol. property was in him in a trust oa- CHAPTER IX. THE RIGHTS AND REMEDIES OF THE PROMISOR AFTER PAYMENT. Sec. 244. Subrogation. Sec. 2145. Subrogation Arises Only When Claim is Paid in Full. See. 246. Subrogation is a Mere Equity and Will Xot be Applied Against the Legal Rights of Others Dealing with the Principal. Sec. 2147. The Promisor Who Pays is Entitled to Have the iSecurities Held by the Creditor Assigned to Him. See. 248. Subrogation Extends Xot Only to Securities, but also to all Rem- edies of the Creditor. Sec. 249. Surety Paying Judgment Against the Principal Will be Subro- gated to the Lien and Other Rights of the Creditor Under the Judgment. Sec. 2150. A Suretyship Promisor Who Pays Will be Subrogated to any Mortgage Security which the Creditors Holds for the Debt. Sec. 2'5'1. Subrogation Applies to One in the Situation of a Surety. Sec. 2/52. Surety Who Pays the Debt is Er.titled to be (Subrogated to a. Pro Rata Share of any Dividend which is Derived from the Assets of the Principal. Sec. 353. Subrogation Among Co-sureties. Sec. 254. Subrogation Between Successive Sureties. Sec. 255. Subrogation in Favor of the Creditor to Securities Held by the Surety. Sec. 256. Same Subject — The View of the English Courts. Sec. 2157. Remedies of the Surety in Cases Where He is Deprived of Sub- rogation by Act of the Creditor. See. 258. When Surety Will be Subrogated to the Principals' Claims of Set-off Against tlie Creditor. Sec. 2159. Subrogation not Available to Onv Who Pays the Debt of An- other as a Mere Volunteer. Sec. 2i60. Co'nTentional Subrogation. Sec. 261. Waiver of Subrogation. Sec 262. Contribution Between Co-sureties — General Principles. Sec. 263. Contribution Between Sureties Bound by Different Instruments. Sec. 264. A Surety for a Surety Not Liable in Contribution. Sec. 2!6'5. Contribution as Affected by Special Contract Between Sureties. Sec. 266. Contribution Between Persons in the Situation of a. Surety. Sec. 267. One Who Becomes Surety at the Request of a Co-surety is Lialble in Oointribution to such Co-suretv. 425 Sec. 269. Sec. 270. Sec. 271. Sec. 272. Sec. 2173. S«e. 274. Sec. 275. 426 THE LAW OF SURETYSHIP. Sec. 266. One Who Aids in the Commission of the Default is Barred from the Right of Contribution. When Contribution May be Enforced. Equitable Contribution or the Eight of a Surety to Call Upon His Co-surety for Exoneration Before Payment. Amount Recoverable in Contribution. Contribution as Affected by the Insolvency of One or More Co-sureties. „ Contribution as Affected by Absence from the Jurisdiction or by the Death of a Co-surety. Surety .Seeking Contribution Must Account to His Co-sureties for Indemnity Furnished Him by the Principal. Surety May Enforce Contribution, Even Though Payment by Him was Without Compulsion. Sec. 27'6. Contribution as Affected by the Release of One of Several Co-sureties. Bankruptcy of a Surety — Effect on Cosurety's Right of Con- tribution. Contribution Between Parties to Bills and Notes. The Right of Indemnity Against the Principal. When Right of Indemnity Arises Equitable Exoneration. Right of Indemnity Arises from Payment or Transactions Equivalent to Payment. Amount Recoverable by Indemnity Proceedings. Eight of Indemnity as Affected by the Non-liability oif the Principal. Sec. 2So. Right of Indemnity as Affected by the Non-liability of the Surety or Guarantor. Sec. 286. When* Judgment Against the Surety or Guarantor is Canelusive as to the Eight to Recover Indemnity. Sec. 287. Indemnity as Affected by the Bankruptcy of the Principal. §244. Subrogation. Subrogation in Suretyship is "a mode wMch equity adopts to compel the ultimate discharge of the debt by him who in good conscience ought to pay it, and to relieve him whom none but the creditor could ask to pay."^ The scope of the right of subrogation consists in the imme- diate transfer, by operation of law, to the promisor in surety ship, of all the rights of the creditor against the principal when- ever the promisor pays the debt or satisfies the obligation. 1 McCormick vs. Irwin, 35 Pa. whether the surety was or was not 117; Lewis' Admr. vs. U. S. F. & G. paid to sign the bond. It is enough Co., 138 S. W. 305; 144 Ky. 425; that the surety was obliged to pay Thompson vs. Davis, 297 111. 11, 16; and did pay the debt. Wasco County 130 N. E. 455. vs. N. E. Equitable Ins. Co., 88 The right is not dependent upon Oregon 465; 172 Pac. 126. Sec. 277. Sec. 278. Sec. 279. Sec. 280. Sec. 281. Sec. 282. Sec. 283. Sec. 284. EIGHTS AND EEMEDIBS. 427 This right of subrogation is independent of any agreement and rests upon principles of natural justice and equity.'' It is the exercise of a power inherent in that branch of reme- dial justice which is administered by the Courts of Equity. Subrogation is not limited in its application to transactions in suretyship. Whenever one pays the debt of another, al- though under no obligation to do so, if the payment was neces- sary for the protection of his own interests, the equity of sub- rogation arises.^ Thus where a purchaser of land, which was warranted free 2 Hodgson vs. Shaw, 3 Myl. & K. ,183, Lord Brougham: "The rule Is undoubted, and it is founded upon the plainest principles of natural reason and justice, that the surety paying off a debt shall stand in the place of the oreditor and have all the rights which he has, for the pur- pose of obtaining his reimbursement. It is hardly possible to put this right of substitution too -high, and the right results more from equity than from contract or quasi con- tract ; unless in so' far as the knoiwn equity may be supposed to be im- ported into any transaction, and so to raise a contract by implication. ... A surety will be entitled to every remedy which the creditor has against the principal debtor, to en- force every security and all means of payment; to stand in the place of the creditor, not only through the medium of contract, but even by means of securities entered intJo without the knowledge of the sure- ty; having a, right to have those securities transferred to him, though there was no stipulation for that; and to avail himself of all those securities against the debtor." Hayes vs. Ward, 4 Johns. Ch. ISO', Kent. C: "This doctrine does not belong merely to the civil law sys- tem. It is equally a settled princi- ple in the English chancery, that a surety will be entitled to every rem- edy which the creditor has against the principal debtor, to enforce every security, and to stand in the place of the creditor, and have his securi- ties transferred to him, and to aivail himself of those securities against the debtor. This right of the surety stands not upon contract, but upon the same principal of natural justice upon which one surety Is entitled to contribution from another." Mathews vs. Aikin, 1 N. Y. 5615, Johnson, J.: "I agree fully with the learned judge who delivered the opinicn of the iSupreme Court, that the right of the surety to demand of the creditor whose debt he has paid, the securities he holds against the principal debtor and to stand in his shoes, does not depend at all upon any request or contract on the part of a debtor with the surety, but grows rather out of the _ relation® existing between the surety and the creditor, and is founded not upon any contract, express or implied, .but springs from the most obvious principles of natural justice." . Robertson vs. Sullivan, 59 So. 846; 102 Miss. 581. sGaskill vs. Wales, 36 N. J. Eq. 527; Cockrum vs. West, 122 Ind. 372'; 23 N. E. 140; Murray vs. O'Brien, 103 Pac. 840; Lackawanna Trust & Safe Deposit Co., vs. Gome- ringer, 296 Pa. 179'; 84 Atl. 757. 428 THE LAW OF STJKETYSHIP. from incumbrance, finds it to be subject to a judgment lien, and to prevent a sale on execution, he pays the judgment, he ia at once subrogated to the position of the creditor, and if the judgment was a lien upon other lands of his vendor, he may have execution on his own account.* The same rule applies where a junior mortgagee is coanpelled to pay a prior incum- brance to prevent foreclosure at a time or under circumstances that would defeat his claim.^ The principles of subrogation as applied in transactions other than suretyship may be further illustrated in a case where a loan was made with the understanding that it was to be used in paying ojff all incumbrances upon certain land, and that a mortgage was to be executed as security which would thereby become a first lien. The mortgage when executed being defect- ive and invalid, it was held that the one advancing the money ought to be subrogated to the rights of the prior incumbrancers whose claims had been paid off by him." If the prior liens had been assigned to the one advpncing the consideration for their discharge, his rights to enforce them could not be questioned, and because of the manifest justice * Beall vs. Walker, 26 W. Va. 741. person making the payment as the See also Hancock vs. Fleming, 103 owner thereof for certain definite Ind. 533; 3 N. E. 254; Warren vs. purposes and keeps it alive and pre- Hayzlett, 45 Iowa 235. serves its lien for his benefit and se- Arnold vs. Green, 116 N. Y. 566; eurity. According to the well-es- 23 N. E. 1, Farm, J. : " This appeal taWished principles upon which the presents the single question whether, doctrine of equitable assignment by under all the circumstances of the subrogation rests, if the person pay- ease, the defendant should have been ing stands in such a relation to the substituted in the place of Mr. Wads- premises that his interest, whether worth aa the owner of the mortgage /legal or equitable, cannot otherwise in question. Did he by the fact of be adequately protected, the trans- payment become the equitable as- action will be treated in equity aa signee of the security and entitled an assignment." to enforce it for his own reimburse- s Porter vs. Vanderlin, 146 Pa. ment and the protection of his in- 138; 23 Atl. 350; Hull vs. Godfrey, terest in the land? Under some cir- 31 Neb. 204; 47 N. W. 850; Twomb- cumstances the payment qf a mort- ly vs. Gassidy, 82 N. Y. 159. cage does not satisfy it or destroy « Amick vs. Woodworth, 58 0. S. its lien, because equity regards the 86; 50 N. E. 437. RIGHTS AND REMEDIES 429 of the claim, equity dispenses with the formality of the as- signment in cases where the necessity for protection arises.'* Subrogation in all its phases appeals to the conscience of the Court, and the Court is clothed with wide discretion in its application^ By statute, in England, whoever pays the debt of another as surety is entitled to have assigned to him all securities held by the creditor as well as any judgment which the creditor may have obtained against the principal.' The English statute is clothed in the language of the English common law and is everywhere the law.' 6a Southern Cotton Oil Co. vs. Napoleon Hill Cotton Co., 158 S. W. 1082; 108 Ark. oSo. 7 Acer vs. Hotchkiss, 97 N. Y. 402, Finch, J.: "The doctnine ol subro- gation is a device to promote Justice. We shall never handle it unv^isely if that purpose controls the effort, and the resultant equity is steadily kept in view " 8 Mercantile Lav? Amendment, Statute 19 & 20 Vic, c. 97, s. 5: "Every person who, being surety for the debt or duty of another, or being liable with another for any debt or duty, shall pay such debt or perform such duty, shall be entjtlfed to have assigned to him, or to a trustee for him, every judgment, specialty, or other security which shall be held by the creditor in re- spect of such debt or duty, whether such judgment, specialty, or other security shall or shall not be deemed at law to have been satisfied by the payment of the debt, or performance of the duty, and such person shall be entitled to stard in the place of the creditor and to use all the rem- edies, and, if need be,, and upon a proper indemnity, to use the name of the creditor, in any action, or other proceeding, at law or in equity, in Order to obtain from the principal dd)tor, or any co-surety, co-contrax:t- or, or co-debtor, as the case may be, indemnification for the advances made and loss sustained by the per- son who shall have so paid , such debt or performed such duty, and suclj payment or performiance so made by such surety shall not be pleadable in bar of any such action cr other proceeding by him: Pro- vided, always, that no co-surety, co- contractor, or co-debtor shall be en- titled to recover from any other co- surety, co-contractor, or co-debtor, by the means aforesaid, more than the just proportion to which, as be- t'.Teen those parties themsielves, such las-t-mentioned person shall be justly liable" 3 Lewis vs Palmer, 28 N. Y. 271 ; State Bank vs. Smith, 1.55 N". Y. 185; 49 N. E. 660; Billings vs. Sprague, 49 111. oOO'; Beaver vs. iSlanker, 9'4 111. 175; Young vs. Vough, 23 N. J. Eq. 325% Klopp vs. Lebanon Bank, 46 Pa. 88 , Fawcetts vs. Kimmey, 33 Ala. 261; Torp vs. Gulseth, 37 Minn. 133; 33 N". W. 550; Allison vs. Sutherlin, 60 Mo. 274; iScribner vs. Adams, 7-3 Me. 541; Guthrie vs. Pay, 36 N«!b. 912; S4 N, W. 971 ; Aetna Co. vs. Thomp- • son, 68 N. H. 20 ; 40 Atl. 396 ; Liles vs. Eogers, 113 X. C. 197; 18 S. E. 104; Nat. Bank vs. Gushing, .53 Vt. 430 THE LAW OF STTEETYSHIP. The promisor in suretyship may be subrogated to the securi- ties held by the creditor even though he made his contract with- out any knowledge that the creditor held such securities." The right also attaches whether the securities come into the posses- sion of the creditor before or after the execution of the surety- ship contract/^ §245. Subrogation arises only when claim is paid in full. The claim of the creditor must be fully satisfied before there can arise any equity of subrogation. The creditor's right to the possession of all the securities is superior to the equity of the surety or guarantor, and the cred- itor is not obliged to suffer the inconvenience or risk of parting with any of his resources until the debt is paid in fuU,^^ unless the creditor consents. ^^ ,321; James vs. Jacques, 26 Tex. 320; Band vs. Barrett, 66 Iowa 731; 24 N. W. 530. Lidderdale vs. Eobinson, 2 Brock. 159, Marshall, C. J.: " Where a per- son has paid money for which others were responsible, the equitable claim which such payment gives him on those who were so responsible, shall be clothed with the legal garb with which the contract he has discharged was invested, and he shall be substi- tuted, to every equitable extent and purpose, in the place of the creditor whose claim he has discharged." loDempsey vs. Bush, 18 O. S. 376 Hevenei vs. Berry, 17 W. Va. 474 Mayhew vs. Crickett, 2 Swanst. 185 Forbes vs. Jackson, 19 Ch. D. 615 Lake vs. Brutton, 8 De G. M. & Q. 440; Duncan vs. North & South Wales Bank, 6 Appeal Cases 1. "Havens vs. Willis, 100 N. Y. 482; 3 N. E. 313; Brandon vs. Bran- don; 3 De G. & J. 524. 12 Ames vs. Huse, 55 Mo. App. 422 J Commonwealth vs. Ches. & Ohio Canal Co., 32 Md. 501; Brough's Estate, 71 Pa. 460; Mus- grave vs. Dickson, 172 Pa. 629; 33 Atl. 705; McGrath vs. Carnegie Trust Co., 221 N. Y. 92; 116 N. E. 787; 21 Columbia Law Review 293; Barton vs. Matthews, 141 Ark. 262; 216 iS. W. 693; 9 A. L. R. 1592, at page 1596, note, "Payment of entire claim of third person as condition of subrogation." Barton vs. Brent, 87 Va. 385; 13 ®. E. 29; Covey vs. Neff, 63 Ind. 391; Vert vs. Voss, 74 Ind. 566; Bartholomew vs. First Nat. Bank, 57 Kan. 594; 47 Pac. 519; Conwell vs. McCowan, 53 111. 363; Coe vs. N. J. Midland Ry. Co., 31 N. J. Eq. 106; Rice vs. Downing, 12 B. Mon. (Ky.) 44; City of Keokuk vs. Love, 31 Iowa 119; iStehoonover vs. Allen, 40 Ark. 132; Gannett vs. Blodgett, 39 N. H. 150; Jones vs. Harris, 90 Ark. 51; 117 iS. W. 1077. 13 Fisher vs. Columbia Bldg. & Loan Assn., 59 Mo. App. 430; N. J. EIGHTS AND REMEDIES. 431 "WLten his debt has been only partially paid, it would ly unreasonable to hold that the third party who made such pay- ment thereby acquired a precedence over him, or was even placed on an equal footing, in reference to the security for the pajTuent of the remainder of his debt." ^* The payment need not be made wholly by the surety. If the principal pays .1 portion of the debt, the surety on the pay- ment of the balance may be subrogated.^" Where the creditor holds security for several obligations of the principal for some of which another is surety, the latter, although paying the entire debt for which he is surety cannot be subrogated to the securities until all the debts are satisfied for which the collaterals are held.^" The same principle applies when the creditor has security for a debt payable by installments and a surety is personally bound for one installment.^' Midland E. R. Co. vs. Wortendyke, 27 N. J. Eq 6518. "Cason vs. Connor, 8'3 Tex. 26; 18 S. W. «<6S. i^ee also Graff & Co.'s Estate, 139 Pa. e9; 21 Ail. 233, Mitchell, J.: '■However small the real debt to which the mortgage may be redoioed, he ia not only entitled to the whole land for its security and ultimate payment, but also to the sole and unimpeded possession, direction, and control of the mortgage and of all actions, remedies, or arrangements tliat they may desire to take there- on.'' '■''K"eal vs. Buffington, 4,2 W. Va. 337 ; 26 S. E. 172 ; Magee vs. Leg- gett, 48 Miss. 1'39; Hess's Estate, 69 Pa. 272; Joiirnal PuWisbing Co. vs. Barber, 165 N. C. 478; 81 S. E. 695. loWileox vs. Fairhaven Bank, 7 Allen 270, Merrick, J.: "It is obvi- ous that, in order to become entitled to such substitution, ihe must first pay the whale of the debt or debts fcr which the property is mortgaged or the collateral security ia given to the creditor; for it would be manifpsLiy unjust, and a plain vio- lation of his rights, to compel him to relinquish any portion of the property before the obligation for the performance of which it was con- veyed to him as security has been fully kept and complied with." Sipe vs. Taylor, 106 Va. 231; 5S S. E. 542 ; Finnell vs. Jas. H. Good- man Co. Bank, 156 Cal. 18; 103 Pae. 183. if Carithers vs. Stuart, 8'7 Ind. 424; Massie vs. Mann, 17 Iowa ^l. Contra — Lynch vs. Hancock, 14 S. C. 66. Ward vs. Nat. Bank of New Zea- land, 8 New Zealand, L. E. 10; where it was held that where one ia surety for a part of the debt he is entitled, on payment of that part, to be subrogated to a proportionate share of the securities which the creditor holds for the whole debt. i32 THE LAW OF SUEETYSIIIP. §246 Subrogation is a mere equity and will not be applied against the legal rights of others dealing with the prin< cipal. A surety who pays the debt of another will be subrogated to the remedies of the creditor in those cases where the transaction interferes with no vested rights of other persons in their rela- tions with the principal. If the payee of a promisory note obtains judgment against the maker and the indorser, and the maker gives bond in stay of execution with another as surety, the latter by paying the judgment is not subrogated to the rights of the creditor against the indorser. It is one of the fixed rights of an indorser to pay the debt at maturity, and proceed for his indemnity against the maker. This valuable right is infringed and action upon it stayed by the act of the surety in executing the bond. The surety upon the bond cannot place the indorser in this position and then enforce payment from him under his so called equity of sub- rogation.^* If a person is surety for a debt, or indorser upon a note, or in any position of suretyship and judgment is entered against the principal, such liability continues even though the principal se- cures a stay of execution, since the right to have stay of execu- tion by giving bond must be considered as having been in the contemplation of the parties at the time the suretyship eon- tract was made, and if the principal fails to pay at the expira- tion of the stay the creditor may exercise his option to proceed against the original suretyship obligation or against the stay bond. If he proceeds against the former, the promisor may be sub- rogated to the creditor's right on the stay bond,^® but if the pay- is Allegheny Valley R. Co. vs. Denier vs. Myers, 20 O. S. 336 ; Han- Dickey, 131 Pa. 86; 18 Atl. 1003; by's Adm. vs. Henritze's Admr., 85 Bohannon vs. Combs, 12 B. Mon. Va. 177; 7 S. E. 204; Friberg VB. (Ky.). 577. Donovan, 23 111. App. 58. 19 Schnitzel's Appeal, 49 Pa. 23; EIGHTS AND EEMEDIES. 433 ment comes from the stay bond, the debt Is thereby discharged as against all prior parties. It is by the application of this rule that the rights between sureties upon successive appeal bonds are adjusted. If bond is given in appeal and judgment is rendered against the appellant, it is the right of the surety to pay the judgment and be at once subrogated to the righta of the creditor upon the judgment : but if a subsequent or second appeal is taken with new sureties, the latter will not be subrogated to the rights of the creditor upon the first bond although the creditor may pro- ceed upon either bond at his option. The last bond is in derogation of the rights of the first sure- ties and no liability exists against them in favor of the last promisors. Where successive appeal bonds were given it was said in reference to the rights of the last bondsmen, " But for their intervention the judgments may have been collected of the de>- fendant therein. They secured the delay by agreeing to pay the judgment. The present defendants may have been injured, and justice would seem to demand, that between parties thus situated the primary liability should rest upon those who inter- vened to procure the delay. It is a general rule that sureties, upon payment, are entitled to be substituted to all the rights and remedies of the creditor as to any fund, lien or equity to which the latter may resort for payment, and in equity are entitled to the benefit of any judgment or instrument against the principal. This right of substitution does not depend upon contract but upon principles of equity arising out of the rela- tion of principal and surety, and the obligation of the former to indemnify the latter against loss. Upon the affirmance of the judgments at the General Term, these defendants had a right to pay the same as sureties, and to be substituted to the rights of the plaintiff in the judgments and to enforce the same against the defendants therein. " In that case, upon appeal to the Court of Appeals, the un- dertaking would necessarily inure to the benefit of the defend- ants as equitable owners of the judgments, and upon affirmance 434 THE LAW OF SURETYSHIP. in the Court of Appeals they could enforce it against the second sureties. The latter agreed, upon the contingency of affirmance, to stand in the place of their principal, the defendant in the judgments, and to pay the judgments. In effect they became sureties to and not for these defendants, and, hence, would not have been entitled, upon payment, to substitution against them." " l§247. The promisor who pays is entitled to have the securities held by the creditor assigned to him. Subrogation carries with it the right, on the part of the prom- isor who pays the debt of another, not merely to require the creditor to turn over such corporeal property which he holds as security, but also by proper assignment to substitute the surety as pledgee of all collateral or incorporeal securities and place the surety or guarantor in such position in reference thereto that they may enforce the collateral in their own name, and if the creditor does not upon demand make such assignment, the promisor may enforce the right by action. This right is of special importance where the creditor has a judgment for the debt which is a lien upon the lands of the debtor, or if no such lien exists where the assignment of the judgment would enable the promisor to acquire such lien. It is accordingly held that a surety who pays a judgment is entitled to have an assignment of the judgment to himself' 20 Hinckley vs. Kreitz, 58 N. Y. Mass. 563, where it is held that 583, 590. neither set of sureties in successive Where in a legal proceeding there judicial bonds is entitled to subroga- are successive sureties, the last tion against the other, surety is regarded as the primary 21 Townsend vs. Whitney, 75 X. Y. one; and, if he pays the debt of his 425; Creager vs. Brengle, 5 Harr. & principal, he has no right of sub- J. (Md. ) 234; Kramer vs. Bankers' rogation against the preceding sure- Surety Co., 90 Neb. 301; 133 X. W. ties. National Surety Co. vs. White, 427. 21 Ga. App. 471; 94 S. E. 589. It is also held in Maryland tlmt Contra — Howe vs. Frazer, 2 Rob. the payment of the judgment by t'.ic (La.) 424. surety, of itself, in equity, operates See also Holmes vs. Day, 108 EIGHTS AND REMEDIES. 435 If there is no judgment, he is entitled to have the original debt assigned to him.^^ §248. Subrogation extends not only to securities but also to all remedies of the creditor. The payment by a promisor in suretyship of obligations of the principal subrogates the promisor to all the rights of action "Which the creditor might have maintained against parties whose wrongful dealings vnth the principal were the cause of the default. Thus where a receiver used trust funds in paying his individ- ual debt at a bank, the bank having knowledge of the' trust char- as an aasignment of the judgment, so as to enable him to have execution for his own benefit. Crisfield vs. State, 55 Md. 192; Potvin vs. Mey- ws, 27 Neb. 749; 44 N. W. 25; Burke vs. Lee, 59 Ga. 165; Benne vs. Schnecko, 100 Mo. 250; 13 S. W. 82. In Kansas the code provides for an assignment of a judgment to a sure- ty who pays. Harris vs. Frank, 29 Kan. 200. If the judgment is assigned to the surety he may have execution on his own behalf, or a revival of the judgment lien on the land of the debtor, if such lien has become dor- mant. Harper vs. Kemble, 65 Mo. App. 514. 22Sublett vs. McKinney, 19 Tex. 438, Wheeler, J.: "It is the doc- trine of the Civil Law, and it was the doctrine of the Court of Chan- cery in England in the time of Lord Hardwick, that the surety is entitled upon the payment of the debt of the principal, not only to have the full benefit of all the collateral secur- ities, both of an equitable and legal nature, which the creditor has taken as an additional pledge for his debt, but be is entitled to be substituted, as to the very debt itself, to the creditor, and to have it assigned to him." Lumpkin vs. Mills, 4 Ga. 349, Nis- het, J.: "Now, what I have to say in reference to this reason, is this — it applies with equal force in favor of the surety's right to the transfer of the debt itself, as in favor of his right to a transfer of the collateral securities. . He is entitled to the lat- ter, not by contract, but according to the principles of natural reason and justice. By these principles, he is made to stand in the place of the creditor. And so standing, the right of collateral securities follows. Here is the doctrine of substitution recognized, and the powers of a Court of Chancery are invoked to give it effect. . . . The substitu- tion of the surety is not for the creditor as he stands related to the principal after the payment, but as .he stood related to him before the payment. He is subrogated to such rights as the creditor then had against the principal." The only element of substitution in subrogation is of one person in the place of another, and the per- son so substituted can exercise no right not possessed by his predeces- sor, and can only exercise such right under the same conditions ajid limi- tations as were binding on his pred- ecessor. Poe vs. Phila. Casualty Co., 118 Md. 347; 84 Atl. 476. 436 THE LAW OF SUEETYSHIP. acter of the funds, and the receiver being in default, his surety, after payment, brought action against the bant claiming to be subrogated to the rights of the creditor to subject .the trust funds, the Court said : " The result of the authorities is that the surety who has paid the debt of his principal is, upon the equity which springs out of the relation of principal and surety, and the fact of his payment, subrogated to all the rights and remedies of the creditor. It may, therefore, be stated that the right of a surety, when he has paid the debt of his principal, to invoke the doctrine of subrogation is not dependent upon whether he has recovered judgment against the principal and issued thereon execution which has been returned nulla bona, as it does in cases where a creditor by a creditor's bill seeks the aid of a court of equity to obtain relief It is stated to be a rule dedueible from many authorities, that a bank cannot use a deposit to pay the individual debt of the depositor due it when it has knowledge that the deposit is held by the depositor in a fiduciary capacity and does not belong to him personally It seems, therefore^ clear to us that the defendant was liable to the beneficiaries in the partition suit for the amount of money collected by them for the receiver and applied to the payment of his individual indebtedness to it, and that it follows as an inevitable corollary to this proposition that the plaintiffs, who were compelled as sureties for the re- ceiver on his bond to pay the amount specified in the order of the court to the beneficiaries, in consequence thereof, became in equity subrogated to their rights as respects the fund which was held for their use by the defendant, and are entitled to recover the same in this action." " 23 Clark vs. First Nat. Bank, 57 converted, and the surety brought Mo. App. 277. action against the pledgee. Held — See also Blake vs. Traders Nat. " The payment was to the trustees, Bank, 145 Mass. 13; 12 N. E. 414. and was a substitute for the fund In this case a trustee pledged bank which was in the hands of the de- shares belonging to his trust as a fendant, and which it was bound to security for his individual debt. His account for to the trustees, and successor in the trust recovered from would give to the surety all the the surety the value of the stock so rights which the trustees had to EIGHTS AND KEMEDIBS. 437 So also where an administrator misapplies assets in his hands and invests them for his own account, the creditors of the estate have the option to go against the bond of the administrator, oi pursue the fund if they are able to trace and identify it,^* and if they elect to collect from the sureties, the latter will be sub- rogated to their rights to subject the funds. ^° Where the bond is to secure the purchase price of- property, the vendor reserving title, a payment by the surety subro- gates him to the right of the vendor to maintain ejectment against the purchaser, or those claiming under him.^" recover the fund; it would operate 19 an assignment to the surety cf the fund, and of the right of action of the trustees to recover it. In this case, the defendant and the surety were both liable to the trustees for the amount of the trust property; the former, in consequence of partici- pating in the wrongful act of the first trustee; and the latter, by his contract to indemnify the estate against such act. The cases are analogous where one owner of prop- erty has claims for a loss against an insurer and a tort-feasor. The in- surer is in the nature of a, surety, and, upon paying the loss he is sub- rogated to the rights of the owner to recover for the tort. Hart vs. Western Railroad, 13 Met. 99 ; Clark vs. Wilson, 103 Mass. 219; Mercan- tile Ins. Co. vs. Clark, 118 Mass. 288." National Surety Co. vs. State Savings Bank, 156 Fed. Zl ; American National Bank vs. Fidelity & De- posit Co., 58 S. E. 867 ; U. S. F. & G. Co. vs. People's Bank, I'SY S. W. 414. See also Powell vs. Jones, 1 Ired. Eq. (N. C.) 3^7; Cowgill vs. Lln- ville, 20 Mo. App. 138. The right of subrogation will not be available in following trust funds wher« it is shown that the one re- ceiving the fund had no knowledge of its trust character. Brown vs. Houck, 41 Hun 16. 2tor for contribution. But a different rule prevails where one of the joini judgment debtors is a, surety upon the obligation put into judgment. Under the civil lanv, a surety pay- ing the joint obligation is entitled not only to be subrogated to all the securities which the creditor holds for the payment of the d'ebt, but he is entitled to be substituted as to the very debt itself, to the creditor, by way of cession or assignment. It treats the transaction between the surety and the creditor, according to the presumed intention of the par- ties, to be not so much a payment as a sale of the debt." Cotrell's Appeal, 23 Pa. 2i94. Woodward^ J.: "Subrogation is founded on principles of equity and benevolence., and may be decreed where no contract or privity of any kind exists between the parties. Wherever one not a mere volunteer discharges the debt of another, Tie is entitled to all the remedies w'hich the creditor possessed against the debtor. Actual payment discharges a judgment or other encumbrance at law, but where justice requires it we keep it afoot in equity for the safety of the paying surety." Appeal of Ward, IQiO Pa. 289; Boltz's Estate, 138 Pa. 77, lEf Atl. 3013; Bankers' iSurety Co. vs. Linder, 137 X. W. 496; George vs. Crim, 66 S. E. 526; Fidelity & Deposit Co. vs. Sousley. 1.51 .S. W. 3'5'3: iSmith vs. Davis, 76 S. E. 670;' Burrus vs. Cook, 93 S. W. g&S. Contra — ^Foster vs. Trustees of Athenaeum, 3 Ala. 302 ; Adams vs. Drake, 11 Cush. 504. 30 German A-mjerican ©avdngs Bank vs. Fritz, 68 Wis. 390 ; ,32 N. W. 123 ; Furnold vs. Bank, 44 Mo. 336 ; iSmith vs. Rumsey, 33 Mich. 183; LidiZjr- dale vs. Robinson, 2 Brock. 159. Marshall, C. J.: "The cases sup- pose the surety to stand in the place of the creditor as completely as if the instrument had been transferred to him, or to a trustee for his ulse. Under this supposition, he would be at full liberty to proceed against every person bound by the instru- ment. Equity would undoubtedly restrain him from obtaining more from any individual than the just proportion of that individual; but to that extent, his claim upon his co-surety is precisely as vialid as upon his principal." 444 THE LAW OF SUEETYSHIP. §250. A suretyship promisor who pays will be subrogated to any mortgage security which the creditor holds for the debt. Where a surety pays a debt for which the creditor holds a mortgage and the latter assigns the mortgage to the surety, the rights of the surety in the mortgage do not depend solely upon the application of the doctrine of subrogation, but the transac- tion is rather a purchase, and the rights of the surety, as an as- signee of the mortgage, are unaffected by the fact that by oper- ation of law he might have succeeded to the same interest in the mortgage without an assignment. An assignment of a mortgage to a surety paying the debt is not necessary for his protection since he will be subrogated to the benefit of it by operation of law.^' Subrogation to the position of the mortgagee gives to the surety the right to have foreclosure in his own name,'* or to re- cover possession of personal property covered by the mortgage if the same has been transferred, or its value, if the transferee converts it'" The equity of the surety who pays the debt is superior to any subsequent claim of the creditor, and a cancellation of the mort- gage by the creditor after payment, disregarding the equity of the surety, will not affect the right of subrogation, except as to innocent third persons whose claims thereafter attach. 3' Beaver vs. Blanker, 94 111. 175, assignment of the mortgage and to Sheldon, J.: "As a mere assignee stand in the place of the mortgagee, alone of the mortgage, the complain- and that the mortgage will remain ant might not he able to sustain this a valid and effectual security in fa- deeree in his favor, as the judgment vor of the surety for the purpose of for the mortgage debt was satisfied obtaining his reimbursement, not- in full by the sale under execution withstanding the obligation is paid, of Kleinworth's land. But, upon The mortgage is regarded as not the doctrine of subrogation, we think only for the creditor's security, but there is sufficient support for the de- for the surety's indemnity as well." cree. It is the undoubted principle Murrell vs. Scott, 51 Tex. 520; of equity, that if, at the time when Nat. Bank vs. Gushing, 53 Vt. 321; the obligation of the principal and O'Hara vs. Haas, 46 Miss. 374. surety is given, a mortgage also is as McLean vs. Towle, 3 Sand. Civ made by the principal to the credit- 118; Jacques vs. Fackney, 64 111. 87; or, as an additional security for the Gossin vs. Brown, 11 Pa. 527. debt, then, if the surety pays the S9 Lewis vs. Palmer, 28 N. Y. 271. debt, he will be entitled to have an EIGHTS AND REMEDIES. 443 Thus where the creditor on receipt of payment from the sure- ty entered a satisfaction of the mortgage on the records and thereafter acquired a judgment lien on the land, it was held that the equity of the surety was superior to the judgment lien.*" The question has been somewhat mooted as to whether a sub- sequent advancement by the creditor, for which the surety has not made himself liable, may be tacked to the mortgage and be preferred as a claim upon the property as against the surety's equity of subrogation. In other words, whether the surety must also pay the additional debt in order to have the benefit of the mortgage as to the original debt. The English judges have disagreed upon this point. The Master of EoUs, Sir John Romilly, to whose opinions great def- erence is sho^vn, is credited with the view that the right of the surety to stand in the place of the mortgagee is subject to the right of the mortgagee to make further advances to the mort- gagor, and take further security on his land, and that his lien for the additional charges is superior to the mere equity of subro- gation which accrues to the surety. The rule stated by him was that the surety paying the debt is entitled to subrogation to the securities " provided the creditor has no lien upon them, or right to make them available against the principal debtor, to enforce the payment of a debt different from that which the surety has paid. But if the creditor has such a right, and one arising out of the transaction itself, of which the suretyship forms a part, then the right of the surety to the benefit of the securities is subordinate to the right of the creditor to make them available for the payment of his other claims, and can only be made available after the paramount right is satisfied." " *" City Nat. Bank vs. Dudgeon, 65 for the first sum but not for the oth- m. 11. er, and it was held that, the surety *i Farebrother vs. Wodehouse, 23 must pay the whole sum of £5,000 Beav. 18. The facts in this case were before he could be subrogated to the that two mortgages were given at mortgage. There is a distinction to the same time ; one for £2,000, and be made between additional advance- one for £3,000. The surety engaged ments as a part of the same transac- 446 THE LAW OF SUKETYSHIP. It was later held in England that " The surety is entitled to have all the securities preserved for him, which were taken at the time of the suretyship, or, as I think it is now settled, sub- sequently. !N^or does it matter at all in principle, whether the creditor takes a further security for further advances made prior to the time when the surety makes payment of the debt. They can have nothing to do with the surety. He is entitled to the benefit of the securities, though his payment be not made until after the time when the further advances were made by the creditor. The principle is that the surety in effect bargains that the securities which the creditor takes shall be for him, if and when he shall be called upon to make any payment, and it is the duty of the creditor to keep the securities intact ; not to give them up or to burthen them with further advances." *^ The rule as to tacking upon a secured claim, the subsequent advancement of a creditor is the same in principle whether the security is a mortgage or personal collaterals and the generally accepted doctrine in this county is that the equity of the surety attaches to the collaterals as soon as the suretyship contract is tion, and subsequent advancements vancements. The creditor sold land, made after the rights of the parties to be paid for in three installments, are fixed. reserving title as security, and the But see Williams vs. Owen, 13 Si- surety engaged for the first install- mons, 597. Where the advancements ment, and upon the payment of this were made as a separate transattion installment claimed subrogation to and subsequent to the suretyship the vendor's lien, and the Court said, contract, and it was held that the " This cannot be equity. The surety surety must pay the subsequent will be permitted to occupy the place liens before exercising his right of of the creditor, when the latter no subrogation. longer has occasion to hold it for his See also Grubbs vs. Wysors, 32 own protection, but equity will Gratt. 127. The facts of this case never displace him, to his prejudice, seem to be parallel with those upon merely to give the surety a better which Sir John Romilly based his footing." opinion, as quoted in the text. The See also Rice vs. Morris, 82 Ind. creditor had security for the entire 204. debt and for a part of it had the ^2 Forbes vs. Jackson, 19 Ch. Div. personal obligation of a surety. The 615 (1882). debt in its entirety arose out of the See also Bowker vs. Bull, 1 Sim. same transaction and was not as in (N". S.) 29; Drew vs. Lockett, 32 Williams vs. Owen (ubi supra) Beav. 499. made up in part of subsequent ad- EIGHTS AND REMEDIES. 447 made, and this equity cannot be displaced so as to apply the se- curities to subsequent advancements until the surety has first been indemnified.*^ §251. Subrogation applies to one in tbe situation of a surety. One to whom the privileges of suretyship are extended by op- eration of law is clothed with all the benefits of the relationship 43 Nat. Exchange Bank vs. Silli- man, 65 N. Y. 475. Dtoight, C: " The only doubt that can arise in the case at bar is, whether the defendants can insist on a priority of application of the pro- ceeds of the collaterals, or whether they are only entitled to share in them, pari passu, with the plaintiff. I think that the presumption is, that the equity of a surety attaches to the trust' fund as soon as the trust relation is created, and the burden of proof is on any one who asserts the contrary to establish it. Un- doubtedly an arrangement might be made whereby the right of subroga- tion might be qualified or modified by agreement, so that subsequent sureties, on wholly different and later claims, might participate in the benefit of collateral securities. This would not be the ordinary rule, and some evidence would be required to establish its existence in a par- ticular case. The same rule must be applied to a creditor making sub- sequent advances to the debtor who deposited the collaterals; while as between him and the debtor, they might be applied to all claims rat- ably; yet as to the surety, they could not be, unless he knew, or had reason to know, that such was the fair intent of the transaction. The ordinary interpretation of the deal- ings of the parties would be, that the surety, when he undertook his liability, acquired, in equity, a lien upon the fund, which the creditor could not displace. ... It is not necessary to contend that these rules would be applicable if the col- laterals were deposited as security for one transaction consisting of sev- eral parts or branches. In that case it may be that there are no superior equities, and that the collaterals must be applied to the entire indebt- edness. This was so held in Fare- brother vs. Wodehouse (23 Beav. 18 ) . This case was placed distinct- ly on the ground that at the very time the surety entered into his ob- ligation, there was a loan of two sums by the same creditor to the same debtor, of which the surety was made aware. The case at bar would resemble it if it should be supposed that a number of notes were dis- counted at one time, and on one of them there was an indorser, and on others none, and the indorser knew all the facts ; even then the doctrine of tacking would need to be invoked to shut out the surety. Whether that could be applied in our law, I need not consider. What now is claimed is, that the rule of priority must prevail where the transactions are distinct and unconnected, and that where they are apparently sep- arate, the burden of proof is on the creditor to show their connection and thus to overcome the rule of pri- ority." 448 THE LAW OF SUEETYSHIP. the same as if a special undertaking had been entered into to pay the debt of another. Thus where a retiring partner is called upon to pay a firm debt, which by agreement between himself and pai-tner should have been paid by the latter. The retiring partner who thus pays is in the situation of a surety and will be subrogated to all the securities and remedies of the creditor.^* Or where a judg- ment is a lien upon two pieces of land and the owner conveys one of them, the vendee is in the situation of a surety, and to the extent of the judgment which he is required to pay may be sub- rogated to the remedies of the creditor, and enforce the lien against the remaining piece of land.*^ The same principle is involved where land is sold subject to a mortgage which the purchaser assumes and agrees to pay, the vendor remains liable for the debt, but is in the situation of a surety, and if he pays he will be subrogated to the mortgage and may have foreclosure for his ovm benefit.*^ A regular indorser of a bill or note is in the situation of a surety, and as to him all prior parties are principal obligors, and upon payment, either voluntarily or otherwise, he is entitled to subrogation to all the remedies of the holder against the maker or other prior parties, and to have recourse to all securities in the possession of the holder which belong either to the maker or the intervening indorsers. It was held that an indorser paying "was entitled to be subro- gated to the right of the holder to have execution against the person of the principal debtor.*^ Where the maker of a note executes a mortgage, or pledges collateral for its security, the indorser who pays the note is en- *iConwell vs. McCowan, 81 111. *e Marsh vs. Pike, 10 Paige Ch. 285; Shinn vs. Shinn, 91 111. 477; 595; Johnson vs. Zink, 51 N. Y. 333; Chandler vs. Higgins, 109 111. 602; Ayres vs. Dixon, 78 N. Y. 318; Or- .«tna Ins. Co. vs. Wires, 28 Vt. 93; rick vs. Durham, 79 Mo. 174; Brown Scott's Appeal, 88 Pa. 173; Laylin vs. Kirk, 20 Mo. App. 525. vs. Knox, 41 Mich. 40;.l N. W. 913; " Woodward vs. Pell, L. R. 4. it). Swan vs. Smith, 57 Miss. 548. B. 55. ill Lowry vs. McKinney, 68 Pa. 294. KIGI-ITa AND BEMEDIES. 449 titled to be subrogated to the rights of the holder in the mort- gage and collateral/* Where a wife joins in a mortgage on lands of her husband, for the purpose of relinquishing dower, and thereafter redeems the land from the mortgage with her own funds, she will be sub- rogated to the lien and priority of the mortgage.*" It is held that where a wife pays a mortgage, executed by herself and husband, upon land in which she has a life interest, that she will be subrogated to the rights of the mortgagee to the amouiLt of her payment.'"' In a case where two persons were jointly liable for a debt, and as to each other were co-debtors, it ■was held that the one paying the debt is in the situation of a surety and entitled to be subrogaied to the rights of the creditor against his co-debtor.'*'^ ■18 Bridgman vs. Johnson, 44 Mich. 491; 7 N. W. 83; Seixas vs. Gonsou- lin, 40 La. Ann. 351 ; 4 South. 453 : Beckwith vs. Webber, 78 Mich. 390; 44 N. W. 330; O'Hara vs. Haas, 46 Miss. 374 ; Yates vs. Mead, 68 Miss. 787; 10 South. 75. Contra — Applewhite vs. Shaw, 4 Humph. (Tenn.) 93. It is held that an aceommodation- aceeptor of a bill, while a principal debtor as to the holder, is a mere surety as to the drawer, and is en- titled to subrogation to the securi- ties of the drawer in the hands of the holder. Toronto Bank vs. Hunter, 4 Bosw. (N. Y.) 646. 49 Jefferson vs. Edrington, 53 Ark. MS; 14 S. W. 903; Fitcher ys. ariffiths, 103 N. E. 47il. soOhmer vs. Boyer, 89 Ala. 27'3; 7 South. 663. =1 Greenlaw vs. Pettit, 87 Teiin. 467; 11 iS. W. 357; The Hattie M. Spraker, 29 Fed. Eep. 457. In this case a vessel was damaged by the common fault of two other vessels, and one of the vessels liable paid the entire claim, and it was held that it was subrogated to the rights of the damaged vessel against the other wrongdoer. See also Baltimore & Ohio R. R. Co. vs. Walker, 45 0. S. 577; 16 N. E. 475. In this case two railroads crossing each other at grade were re- quired by law to keep the crossing in a condition prescribed by statute, and maintain a watchman at the junction. One of the railroads made the repairs and paid all the expenses chargeable by law against both, and brought this action against the oth- er to recover back one-half. The de- fendant contended that the payment was voluntary and raised no implied promise to contribute. But the court applied the rule of subroga- tion, holding that the performance of a joint duty by one co-obligor gives to him the same right to recover from the o^her which was originally vested in the creditor party. A co-obligor paying the joint ob- ligation will be subrogated to the securities deposited with the cred- itor by the othpr joint debtor. Vincent vs. Logsdon, 17 Oregon 284 ; 20 Pac. 429 ; McCready vs. Van Antwerp, 24 Hun 322. 450 THE 'LAW OF SUEETYSIIIP. §252. Surety who pays tlie debt is entitled to be subrogated to a pro rata share of any dividend which is derived from the assets of the principal. If the assets of the principal are administered by proceedings in insolvency, the dividends distributed belong equally to all creditors of the same class^ and where certain debts are secured by the obligations of third parties, the dividend is applicable to each and every part of the secured, debt, and if the debt ex- ceeds the limit of the liability of the surety, the latter, if he pays his obligation, is entitled to receive by way of subrogation, such proportion of the dividend as the amount of his payment bears to the entire debt. Thus a letter of guaranty bound the guarantor to an amount not esceeding £400, but the advancements made to the principal amounted to £625. The assets of the principal were adminis- tered through insolvency proceedings and the question arising was, whether the dividends should be applied wholly in the re- duction of the larger sum, and the balance, up to the limit of the letter of credit to be paid by the guarantor, or whether a pro rata share of the dividend should be applied in reduction of that part of the debt covered by the guaranty, and the guarantor held for the balance, and at was held, " If the whole amount of the debt from M — had not exceeded the £400, it is clear that the defendant would have received the full benefit of the divi- dend of 8s. 7d. in the pound, as he could not have been answer- able under the guaranty for more than the remainder, after the deduction of such dividend ; and although the amount of the debt does in this case exceed the £400, and thereby the position of the creditor is so far altered, that one part of the debt, viz., to the extent of £400, is guaranteed, and the remainder not, still there seems no reason why the application of a payment of so much in the pound upon the whole debt should in any way be affected by the collateral circumstance of the guaranty ; or why such payment should not be applicable as well to the £400 guaranteed as to the part uncovered by the guaranty." °* 62 Bardwell vs. Lydall, 7 Bing., See also Gray vs. Seckham, L. R 489. * 7 Ch. App. 680. iSIGHTS AND REMEDIES. 451 A , similar question also arises in bankruptcy proceedings where tlie claim is in part secured by a surety, and where the holder of the claim has been paid such part, as to whether he may prove the entire claim, and have the dividends upon it ap- plied in reduction of the balance due, or whether he may only prove for the unpaid part with a corresponding reduction in the amount of his dividend. The right of the surety to insist upon the entire claim being proved seems clear, for if under these circumstances the divi- dend is augmented so that together with what the surety has paid the sum exceeds the debt, the surplus would belong to the surety by the application of the doctrine of subrogation.^^ Again where two persons were co-sureties, and one having died the survivor paid the entire demand and presented a claim against the estate of the deceased co-obligor for the full amount paid, it was contended by the estate that the claimant should not be permitted to prove against the estate of his co-surety for the whole debt, when his co-surety only owed him one-half of the debt, but it was held that since each surety was bound in solido to their common creditor for the entire amount of the debt, that either surety paying would be subrogated to the claim of the creditor for the entire debt against the other, and that the survivor might assert the same claim against the estate of the decedent as the creditor himself could have done, and was entitled to receive dividends until reimbursed the full con- tributory share due him as co-surety.^* The National Bankruptcy Act of first surrendering a preference as re- 1898 provides in See. 57i, " When- quired by the Bankruptcy Act, that ever a creditor, whose claim against the surety or guarantor is subject a bankrupt estate is secured by the to the same condition and must also individual undertaking of any per- pay in the amount of such prefer- son, falls to prove such claim, such ence before he can be subrogated, person may do so in the creditor's In re Schmechel Cloak & Suit Co., name, and if he discharge such un- 3 Nat. B. Nev?s. 110. dertaking in vrhole or in part he 63 In re Baxter & Ralston, 18 N. shall be subrogated to that extent to B. R. 497. the rights of the creditor." b4 Pace vs. Pace, 95 Va.. 792 ; 30 It is held that where the creditor S. E. 361. eould not prove his claim without See also Hess's Estate, 69 Pa. 272. 452 THE LAW OF SUEETYSIIIP. It is held that where an insolvent dies, or his assets are admin- istered through insolvency proceedings, and a creditor holds col- lateral security for his debt, upon which he realizes less than the amount of the debt, that he may prove his entire claim against the estate of the decedent or insolvent, and make no ac- count of the collateral until he is paid in full.^° Such right in But see New Bedford Institution for Savings vs. Hathaway, 134 Mass. 69. 65 Merrill vs. National Bank of Jacksonville, 173 U. S. 131; Chem- ical Bank vs. Armstrong, 59 Fed. Kep. 372. Taft, J.: "In Massa- chusetts (Amory vs. Francis, 16 Mass. 309), in Iowa (Wurtz vs. Hart, 13 Iowa 515), in South Caro- lina (Wheat vs. Dingle, 32 Si C. 473; 11 S. E. 394), and in Wash- ington (In re Trasch, 31 Pac. 755), it was held that the rule in equity is the same as the rule in bank- ruptcy, and that the secured cred- itor can prove only for the balance of his debt after the collat- eral shall have been applied. It was so held by ISir John Leach, master of the rolls, in Greenwood vs. Tay- lor, 1 Russ. & M. 185. In Amory vs. Francis, supra. Chief Justice Park- er repudiates the view that the se- cured creditor should be allowed to prove for his full claim, without de- duction for collateral, on the ground that he 'would in fact have a greater security than that pledge\ was in- tended to give him; for, originally, it would have been security only for a proportion of the debt equal to its value; when, by proving the whole debt, and holding the pledge for the balance, it becomes security for as much more than its value as is the dividend which may be received on the whole debt.' With much defer- ence to the great jurist who ad- vanced this argument, we think that it quite incorrectly states the effect of the contract of pledge, which is that the collateral shall be security for the whole debt, and every part of It, and therefore is as applicable to any balance which remains after payments from other sources as to the original amount due. The view of the supreme judicial court of Massachusetts was adopted into a statute which deprives the subse- quent cases in that state of much bearing upon the question before us. The other cases cited, and especially Greenwood v. Taylor, seem to rest on the rule in equity requiring a credit- or with two funds as security, one of which he shares with others, to exhaust his sole security first. As already said, the rule has no appli- cation when its operation would pre- vent the creditor from paying his whole claim. " The great weight of authority in England and this country is strong- ly opposed to the view that a credit- or with collateral shall be thereby deprived of the right to prove for his full claim against an insolvent es- tate. Greenwood v. Taylor was questioned by Lord Cottenham in Mason v. Bogg, 2 Mylne & C. 443. 448, and was expressly repudiated as authority in the court of chancery appeals in Kellock's Case, 3 Ch. App. 769, — a case which, upon this point. is cited with approval in Lewis v. U. S., 92 U. S. 618. In this country, the Massachusetts doctrine was dis- sented from by the Supreme Court of EIGHTS AND EEMEUIES. 453 the creditor carries a corresponding right to a surety in the application of the doctrine of subrogation. 0253. Subrogation among co-sureties. No one of several sureties for the same debt is entitled to any advantage over his co-sureties in the application of the property of the principal for their indemnity, and the principal has not the right to apply his assets to the security of one in preference to another. If the principal has executed a mortgage to one co-surety, or deposited collateral v^ith him, or in any other way secured him out of his own property, and another co-surety pays the debt, he is entitled to subrogation to the benefit of such security as in- demnity against the common burden.'^" A surety who has indemnity out of the property of the princi- pal, is, to the extent of such security, a trustee for his co-surety. The taking of such indemnity from the principal lessens his Xew Hampshire in the early case of Closes vs. Eanlet, 2 N. H. 488. Other oases which fully support the -views we have expressed are: People vb. E. Remington & Sons, 121 N. Y. .136; 24 N. E. 79-3; In re Bates, 116 111. 524; 9 X. E. 257; Findlay vs. Hbsiiier, 2 Conn. 350; Logan vs. An- derson, 18 B. Mon. (Ky.) 114; Bank Ts. Patterson, 78 Ky. 29'1 ; Brown vs. Bank, 79 N. C. 244; Kellogg vs. Mil- ler, 22 Or. 4016 ; 30 Pac. 223 ; Jliller's Estate, 82 Pa. St. 113; Graeff's Ap- peal, 79 Pa. St. 146; Patten's Ap- peal, 45 Pa. St. 151; Miller's Ap- peal, 35 Pa. St. 481 ;' Allen vs. Kaoa- ielBon, li5 R. I. 480, 8 Atl. 705 ; Bank v8.Haug, 82 Mich. 607, 47 X. W. 3.3; West vs. Bank, 19' Vt. 403. Com- pare, also, Kortlander vs. Elston, 2 C. C. A. 657, 62 Fed. 180; Bank Cases, 92 Tenn. 437, 21 S. W. 1070. "The exact point which is common to all the foregoing authorities, and which they all sustain, is that a creditor who has provied his claim against an insolvent estate under administration can collect his divi- dends without any deduction from his claim as proven for collections made from collateral after his proof of claim is iiled." But see West- Inghouse Electric & Mfg. Co. vs. R. Co., 228 Fed. 978. 56 Lidderdale vs. Robinson, 2 Brock. 159; Shaeffer vs. Clendenin, 100 Pa. 565 ; Nally vs. Long, 56 Md. 567; Fiahback vs. Weaver, 34 Ark. 569 ; Hartwell vs. Whitman, 36 Ala. 712; iS'cribner vs. Adams, 73 Me. 541 ; Fuller vs. Hapgood, 39 Vt. 617 ; Reinhart vs. Johnson, 62 Iowa 155; 17 N. W. 452 ; Neely vs. Bee, 32 W. Va. 519; 9 S. E. 898; People's Bank vs. Miller, 85 Kan. 272; 116 Pac. 884. But see Assets Realization Co. vs. American Bonding Co. et al., 88 O. S. 216; 102 N. E. 719; holding that where several sureties arc bound by separate instruments on account of the same principal with limited liability as to each, the rela- tion of co-surety does not exist and on this account collateral deposited with one does not inure to the bene- fit of the others. See also German Amer. Savings Bank va. Fritz, 68 Wis. 390; 32 N. W. 123. 454 THE LAW OF SUBETTSHIP. ability to pay, and it would be a fraud upon his co-sureties to permit him to convert it to his sole use.^' If the indemnity comes from a third person, as where the wife of the principal executes an indemnity mortgage on her separate property to one surety, the rule does not apply, and such indemnity need not be shared with the other sureties.'* §254. Subrogation between successive sureties. Successive sureties for the same principal are sometimes co- sureties, but more often one or more are sureties for the others. An example of the former is where a public officer is required to give additional bond during his term of office, such last bond being cumulative establishes the relation of co-sureties between \ythe successive promisors.^" The execution of a suretyship obligation in the course of a legal proceeding for the collection of a debt for which another is already bound as a surety, or where bonds are given in the pros- ecution of legal remedies in the Appellate Courts in which successive undertakings are required, generally results in plac- ing the ultimate liability upon the last surety, through whose agency the litigation has been prolonged, and while as between such surety and the creditor he may be properly termed a surety for the prior promisor, yet if his contract is solely in the interest of the principal, and without the assent of the prior surety, he is regarded as debtor of all the prior parties, and not entitled to subrogation to the remedies of the creditor against the prior sureties ; but on the contrary if the prior surety pays he will recover by subrogation from the later surety. 67 Carpenter vs. Kelly, 9 O. 106. in their management. He may not Lane, C. J. : " A surety is not abandon them without cause, nor bound by law to seek indemnity; negligently omit the steps necessary yet if the means of indemnity are to render them available." placed in his hands, and he under- See also Sanders vs. Weelburg, takes to retain them, he becomes a, 107 Ind. 266 ; 7 N. E. 593 ; Owen vs. trustee for his co-sureties, because McGehee, 61 Ala. 440; National' they inure to their common benefit. Bank of Commerce vs. Stohinn, 3 and he is bound by the obligations Cal. App..608; 86 Pac. 981; Baber which attach to a trustee to use hon- ^'S- ^^^^^, 80 S- p- f^; ^ ,„ . A. J J^ -iv, J, A J- i- ssLeggett vs. McClelland, 39 0. esty, good faith, and due discretion, „ roa f'SAnte Eec. 158. EIGHTS AND REMEDIES. 455 It is said, " We know of no case in which, on the ground either of contribution among co-sureties or of substitution to the securities of the creditor, a subsequent surety coming in aid of the debtor alone, without the request or concurrence of the origi- nal sureties, and in the regular course of the remedy for coercing the debt from him alone, or for the purpose of obstructing its collection by his own separate proceeding and for his own bene- fit, has obtained in equity either partial or full reimbursement from the prior sureties. The doctrine established by the ad- judged cases, and as we think, in conformity with the true prin- ciples of equity, is that, if under such circumstances, the prior surety is compelled to pay the debts, he thereby becomes entitled by substitution to the rights of the creditor against the subse- quent surety to the whole extent of the payment made and of the obligation of the subsequent surety ; which precludes all right on the part of the subsequent surety, should the debt be coerced from him, to claim reimbursement from the prior surety." "" This rule is usually put upon the ground that the successive surety by prolonging the litigation makes himself an obstacle to the prior promisor by preventing an adjustment of the con- troversy, wherein the prior surety might have had immediate subrogation to the rights of the creditor against the principal, and this conclusion seems to be reached without requiring any showing that the prior surety has in fact been injured."^ «o Brandenburg vs. Flynn, 12 B. first suretyship was that of a Mon. (Ky.) 397. guaranty upon a lease, and the «i Ante Sec. 246. second was an appeal from a I'itzpatrick's Admr. vs. Hill, 9 judgment against the lessee for Ala. 783; Dent vs. Wait, 9 W. Va. ' rent. The Court applies the rule 41; Kellar vs. Williams, 10 Bush and urges two grounds, first, that of (Ky.) 217; Winchester vs. Beardin, a possible injury to the guarantor 10 Humph. (Tenn.) 247'; Moore vs. by reason of the stay of execution, Lassiter, 16 Lea (Tenn.) 630; Pier- and second, a somewhat novel and son vs. Catlin, 18 Vt. 77 ; Fletcher exceedingly doubtful ground that the vs. Menken, 37 Ark. 206 ; McCor- last surety is a " volunteer " and so mick vs. Irwin, 35 Tc. 111. not entitled to subrogation. Opp vs. Ward, 125 Ind. 241 ; Mitchell, J. : " The application of 24 N. E. 974. In this ease the the doctrine of subrogation requires 456 THE LAW OF SUEETYSIIIP. There would seem to be some equity in treating successive sureties as co-sureties in all cases where the prolongation of the litigation in good faith results in no loss to the prior surety. ( 1 ) that a person must have paid a debt due to a third person, for the payment of which another was in equity primarily liable; and (2) that in paying the debt the person paying acted under the compulsion of saving himself from loss, and not as a mere volunteer. . . . It is insisted, however, that in the case of successive sureties, who become bound by separate obligations for the payment of the same debt, the equity of the last surety is superior to that of the first, and that as the liabil- ity of the plaintiff below, as guar- antor, was prior in point of time to that of the appellant as surety on the appeal bond, both being bound for the same debt, the equity of the latter was at least equal, if not su- perior, to that of the former. This view is not maintainable in a case like the one under consideration. It is quite true the plaintiflF below be- came liable, as guarantor, for the payment of all rent, as well as for all damages growing out of the un- lawful detention of the property of the tenant. But it is also true that his liability, which was theretofore uncertain and contingent, became certain and fixed when the landlord recovered judgment for the posses- sion of the leased premises, and for damages for their unlawful de- tention. The guarantor had the right to pay the amount of the judg- ment recovered against his principal, and thus put an end to his liability at once. " By the voluntary intervention of the appellant, in becoming surety in the appeal bond, all further proceed- ings on the judgment by which the landlord was awarded the right of immediate possession, were stayed, and the hands of the guarantor were effectually tied until the appeal was disposed of. . . . Upon the de- termination of the appeal, the land- lord had his election to sue on the appeal bond and recover the rental value of the premises unlawfully de- tained, or to proceed against the guarantor on the lease. He adopt ed the latter alternative. If he had sued on the appeal bond and recov- ered judgment against the surety, it is quite certain that the latter would have had no standing in a court of equity to recover from the guaran- tor. This is so because he occupies the position of a volunteer, and as is pertinently said in Acer vs. Hotch- kiss, supra [97 N. Y. 395]: 'On» who is only a volunteer cannot in- voke the aid of subrogation, for such person can establish no equity.' Gans vs. Thieme, 93 N. Y. 225. Having intervened as u volunteei and by his interposition stayed pro- ceedings on the judgment for pos- session to the prejudice of the guar- antor, whose liability had become fixed and at an end, so far as re- spects future rents, it must be con- sidered in equity that he did so upon the condition that he would take the place of the guarantor from that time forward." The surety on the appeal bond in this case was not a " volunteer " and the doctrine of the New York cases cited has no application to the facta of this case. An earlier case in Indiana seeniB EIGHTS AND EEMEDIES. 457 Without the intervention of the later surety, the earlier prom- isor might be required to pay and suffer great loss and there is no equity under these circumstancee in granting his exoneration opposed to the view stated in the case last cited. Kane vs. The State ex rel. Woods, 78 Ind. 103. In this case a license bond was given by one engaged in selling in- toxicating liquors, conditioned to pay any judgment that might be entered for fines assessed against the principal for violation of the act regulating the sale of liquor. A judgment was rendered upon which stay of execution was allowed by the giving of a bond as provided by law; the sureties upon the stay bond be- ing required to pay, bring action against the sureties of the license bond, claiming subrogation to the position of the state on that bond, and it was held, "The appellee's relator having become, in due course of law and at the request of said Collins, his replevin bail for the pay- ment of the judgments rendered for said fines and costs, and having been eompelled to pay and having paid, as such replevin bail, the said several judgments for said fines and costs, we know of no possible reason why the relator should not be permitted to avail himself of the equitable doc- trine of subrogation, and should not be subrogated to all the rights of the State of Indiana, the judgment creditor, in the bond primarily given by the said Collins to secure the pay- ment of all fines and costs that might be assessed against him." It would seem that in Virginia neither one of successive sureties is entitled to subrogation against the other. That the last cannot recover from the first was held in Sherman's Admr. vs. Shaver, 75 Va. 1, where, although not strictly necessary to the decision of the case, it was said, " If an execution against principal and surety be levied on property of the principal, and a third person, at the request of the principal but without the consent or concurrence of the surety, intervene and bind himself as surety in a bond for the forthcoming of the property on the day of sale and the bond be forfeit- ed, although such third person thus becomes bound as surety for the debt, yet he is not entitled on making pay- ment to be substituted for contribu- tion to the original judgment against the original surety, because by his intromission the property of the principal has been withdrawn from the levy and restored to the debtor instead of being applied, as it otherwise would have been, to the payment of the debt, and thereby the original surety has been injured, and the second surety whose interven- tion has caused the injury has no equity to substitution for indemnity or contribution against the first. The same principle applies to sure- ties on appeal bonds, bail bonds, in- junction bonds, stay bonds, prison- bounds bonds and the like obliga- tions." It appears also to be the rule in Virginia that the earlier bond cannot be subrogated to the subse- quent bonds. Rosenbaum vs. Goodman, 78 Va. 121. In this ease a replevin bond was executed and judgment was ren- dered against the plaintiff who ap- pealed with new sureties to the Unit- ed States Circuit Court of Appeals, and judgment being affirmed, again 458 THE LAW OF SUEETYSHIP. merely because the right to require payment of the first surety is deferred, especially since a re-hearing in an Appellate Court might result in his complete exoneration. The equity suggested has been recognized in cases where the first surety consents to the stay of execution."^ appealed to the United States Su- preme Court. Recovery having been had against the original sureties on the replevin bond it was held that those sureties were not subrogated to the rights of the creditor against the subsequent sureties on appeal. 62Hartwell vs. Smith, 15 O. S. 200. In this case a bond was given to discharge attachment, and judg- ment being rendered in favor of the attaching plaintiff, error was pros- ecuted on the judgment with addi- tional surety, the first surety con- senting. Scott, J. . " In regard to this question of superiority of equities, which is liable to arise in the case of prior and subsequent bonds, exe- cuted by different sureties, for dis- tinct purposes, and both constituting securities in the hands of the credit- or for the same debt, it is well set- tled that if the interposition of the second surety, is for the benefit of the principal alone, without the sanction or assent of the first surety, who may be prejudiced thereby; as when the eflfect of the second bond is to prevent the enforcement of pres- ent payment from the principal, and thus to prolong the responsibility of the first surety; in such a case the equity of the first surety is superior, and he is entitled to be subrogated to the rights of the creditor as against the second. And this doc- trine seems to be entirely equitable, for it is but reasonable that the ben- efit intended for the principal alone, by the second surety, should be con- ferred, if at all, at his own risk, and not at the I'isk or to the prejudice of other parties whose wishes were not consulted in the transaction. " But the rule is otherwise, where the surety in the second bond be- comes bound for a purpose in which both the principal and the prior surety concur, in which they both have an interest, and where the as- sent of the prior surety is express- ly given, or is clearly to be inferred from the circumstances of the case. In such a case the last surety has a, right to look for his indemnity, not only to his principal, but to such fixed securities as had been given to the creditor, when his engagement was entered into, and in the faith of which he may be presumed to have incurred his obligation. ... By the execution of the first bond, Smith procured for his principal the discharge of the order of attach- ment. The creditor was thus pre- vented from securing his claim by a levy upon his debtor's property; the bond of Smith being substituted for such security. By the subsequent judgment against the debtor this se- curity became fixed. It was for the interest of Smith, as well as for that of his principal that this judgment should be reversed." See also Monson vs. Drakely, 40 Conn. 552. EIGHTS AND EEMEDIES. 459 §255. Subrogation in favor of the creditor to securities held by the surety. If the surety holds property of the principal, or has a lien upon the property of the principal as his. indemnity against loss by reason of his suretyship, the creditor may resort to such property or lien and subject it to the payment of his debt. This form of subrogation is available to the creditor without any previous agreement giving to the creditor this benefit, and, as in the case of subrogation by a surety, it rests upon the con- sideration that any property of the principal that has been specifically charged with the payment of a debt, ought not to be used in any other way until that' purpose has been accom- plished." The creditor will be subrogated notwithstanding the surety is discharged by reason of some act of the creditor, or by the oper- ation of the Statute of Limitations."* 03 Curtis vs. Tyler, 9 Paige 432; Owens vs. Miller, 29 Md. 144; Bar- ton vs. Croydon, 63 N. H. 417; Loehr vs. Colborn, 92 Ind. 24; Seibert vs. True, 8 Kas. 52; Pendery vs. Allen, 50 0. S. 120; 38 N". E. 24; Coons vs. Clifford, 58 0. S. 480; 51 N. E. 39; Union Nat. Bank vs. Rich, 106 Mich. 31■■' Arbogast 'vs. Hays, 08 Ind. 26; or be clothed, by the mere operation ^^^^.^^^ °^ Isenhi^, 123 Ind. 10; of law, and upon principles of 33 >j^ ^ ygg . Rjttenhouse vs. Lever- equity, with the rights of an as- jng^ g Watts & Serg. (Pa.) 190; signee of such claim, unless he has Hutch eson vs. Reasch, 15 Pa. Super. Ct. 96. EIGHTS AND KEMEDIES. 473 run against the surety on his right of subrogation at the time he pays the debt."" If there bas been a delay in asserting subrogation, although less than the statutory period of limitations, and third persons without knowledge of the suretyship have acquired liens on the property, the right of subrogation will be deemed waived as to such intervening lienors."' A surety does not waive his equity of subrogation to securities held^by the creditor by accepting collateral or other security from the principal debtor,"' or from, a stranger."" ^262. Contribution between co-sureties — General principles. The basis of the right of contribution between co-sureties is the maxim that equality is equity. The earliest adjudica- tions were based upon the custom of tbe city of London where- by persons having a common liability witb others were put un- der obligations to reimburse their co-obligors wbo paid more than their share. Neither law nor equity fumisbed tbe rem- edy, since no express promise was made by the co-surety to contribute to the common burden, and none could be implied-, as each undertaking was independent of the other and often one was made without the knowledge of the other, but inasmuch js it was the custom to those so bound to share the burden equal- ly, it was considered a duty which should be enforced by a de cree of the court.^°" The equity of contribution between persons jointly or sev- erally bound for the same duty has always been considered 98BeHnett vs. Cook, 45 N. Y. 266; 98 Crawford vs. Richeson, 101 111. Wake vs. Traders' Bank, MS Mass. 351. 13; 12 N. E. 414; Rucks vs. Taylor, ^ ^Ji* ^^^,t?™>Y,7^- Stemmons, 4 ,„ ,.. .„„ ' , ,., , B. Mon. (Ky.) 131. 49 Miss. DO'S; Bushong vs. Taylor, 99 Wesley, Church vs. Moore, 10 82 Mo. 660; Hammond vs. Myers, Pa. 273; West vs. Rutland Bank, 30 Tex. 37o; Maxey ■vs. Carter, 10 19 Vt. 403." Yerff (TpTin i W1 ''"' Oflley vs. Johnson, 2 Leon Jn J \ \ o. -n o,.= 166; Layer vs. Nelson, 1 Vern. 456; "Gring-s Appeal, 89 Pa. SX; Kogh's Estate, 148 Wis. 548; 134 Smith vs. Harbin, 124 Ind. 4'34; m N. W. 663. The right to contribu- X. E. 1051 ; Noble vs. Turner, 69 tion is not affected by the fact that Md. 51i9; 1« Atl. 124; American ""^ "^ ^^^ t'^^o sureties is a surety Fidelity Co. vs. East Ohio Sewer ff /°™P«f ^^i™' ^^^'^ t^,« °tber T,. _, ,„ ,, „ _ ■^c«c* jg g^ surety for accommodation." Pipe Co.. 101 N. E. 67,1. u. S. F. & G. Co. vs. MeGinr,;.' Admr., 147 Kv. 781; 145 IS. W, 663. \ 474 THE LAW OF SUEETYSHIP. clear and undoubted, and courts of both law and equity no-w apply the remedy with great liberality to the one invoking such relief. Some difficulty, however, has apparently been encountered in stating a reason for contribution that is flexible enough to meet all contingencies. The notion of implied contract, such as applies to the surety in his relations vsdth the principal upon which he bases his right of indemnity, is not available for all cases of co-surgties, as the earlier surety often signs, and even pays his obligation without knowing that another is to be or has become co-surety on the same instrument. The same is true also of cases where co-sureties are bound for the same duty by different instru- ments, and each without the knowledge of the other. In an early case considered in England, in which the remedy was applied as a matter of right, as distinguished from the pre- cedents which were founded upon custom, the several sureties were bound on separate instruments, and a rule was stated which has ever since been adhered to. " It is admitted, that if they had all joined in one bond for £12,000 there must have been contribution. But this is said to be on the foundation of con- tract implied from their being parties in the same engagement, and here the parties might be strangers to each other. And it was stated that no man could be called upon to contribute who is not a surety upon the face of the bond to which he is called to contribute. The point remains to be proved that contribution is founded On contract. If a view is taken of the cases, it will appear that the bottom of contribution is a fixed principle of justice, and is not founded in contract The reason is, they are all in aequali jure, and as the law requires equality they shall equally bear the burden In the partic- ular case of sureties, it is admitted that one surety may compel another to contribute to the debt for which they are jointly bound. On what principle ? Can it be because they are jointly bound ? What if they are jointly and severally bound ? What if severally bound by the same or different instruments? In every one of these cases sureties have a common interest and a EIGHTS AND BEMEDIES. 47S common burthen. .... At law all the bonds are forfeit- ed. The balance due might have been so large as to take >n all ,the bonds, but here the balance happens to be less than the pen- alty of one. Which ought to pay ? He on whom the crown calls must pay the crown ; but as between themselves they are in aequali jure, and shall contribute." ^"^ 101 Deering va. Winchelsea, 2 B. & P. 270; S. C, 1 Cox 318 (1787). There is general acquiescence in the doctrine that contribution be- tween eo-sureties will be enforced upon the basis of equitable obliga- tion, and that the court should un- dertake to require parties so related to do that which they ought to do, and not consider it necessary to adopt a legal fiction of implied promise in enforcing the rule. Wells vs. Miller, 66 N. Y. 255, Church, C. J. : " The right to con- tribution between co-sureties de- pends upon principles of equity rather than upon contract. It is well settled that the liability exists, although the sureties are ignorant of each other's engagement. The equity springs out of the proposi- tion that when two or more sureties stand in the same relation to a principal, thej- are entitled equally to all the benefits, and must bear equally all the burdens of the position. In such a case the max- im ' equality is equity ' applies." Robinson vs. Boyd, 60 0. S. 57; 53 N. E. 494, Minshall, J.. "The claim of the defendant below is, that the plaintiff is not entitled to con- tribution, because there is no privity of contract between them. . . . We do not find the doctrine of con- tribution so limited, nor is it re- quired by the principle on which it rests. It is not founded on contract, but arises from the equitable con- sideration that persons subject to a common duty or debt, should con- tribute equally to the discharge of the duty or debt; and so where one performs the whole duty or pays the debt or more than his aliquot part, each of the others should contribute to him, so as to equalize the dis- charge of what was a common burthen." White vs. Banks, 21 Ala. 705, Goldthnaite, J. . " Sureties have the right to claim contribution from each other, in proportion to the amount paid by each upon the com- mon debt; and this right is the result, not of any implied contract between the parties, but of an ac- knowledged principle of natural jus- tice, which requires that those who voluntarily assume a common bur- den should bear it in equal propor- tions." See also Klepper vs. Borchsehius, 13 111. App. 318; Dennis vs. Gilles- pie, 24 Miss. 581 ; Smith's Executors vs. Anderson, 18 Md. 520; Allen vs. Wood, 3 Ired. Eq. (N. C.) 386; Al- drieh vs. Aldrich, 56 Vt. 324. The view has frequently been ex- pressed that the liability to contri- bution rests upon implied contract. This is perhaps but another way of stating the same proposition upon which the cases rest which assume tlie absence of all contract relations. ■ Batard vs. Hawes, 2 El. & Bl. 287, Lord Campbell, C. J. : " To sup- port the action for money paid, it is necessary that there should be a request from the defendant to pay. 476 THE LAW OF STJEETYSHIP. The equitable doctrine of contribution became so well estab- lished that courts of law assumed jurisdiction to enforce the right by adopting the fiction, in many eases, that the parties entered into the contract of suretyship upon the mutual under- either express or implied by law. .... In a joint contract for the benefit of all, each takes upon him- self the liability to pay the w^iole debt, consisting of tlie shares which each co-contractor ought to pay as between themselves; and each, in effect, takes upon himself a liability for each to the extent of the amount of his share. Each, therefore, may be considered as becoming liable for the share of each one of his co-con- tractors at the request of such co- contractor; and, on being obliged to pay such share, a request to pay it is implied as against the party who ought to have paid it." The same idea of implied contract is suggested by Lord Eldon in Cray- thorne vs. Swinburne, 14 Ves. Jr. 164, who says: "And I think that light is properly enough stated as depending rather upon a principle of equity than upon contract; unless in this sense; that, the principle of equity being in its operation estab- lished, a contract may be inferred upon the implied knowledge of that principle by all persons, and it must be upon such a ground, of implied assumpsit, that in modern times Courts of Law have assumed a juris- diction upon this subject." See also Mathews vs. Aikin 1 N. Y. 601. Where the Court in com- menting upon Norton vs. Coons, 3 Denio 130, says: "In that case the circumstances under which the defendant became co-surety were such as to repel the presumption of any promise to make contribution. But the Court held that his being a surety on the same contract without qualification in terms was sufficient to fix his obligation to contribute, and that for the purpose of giving the plaintiffs a remedy the court would presume a promise. A prom- ise was, therefore, imputed where none confessedly existed, in order to provide a remedy for the party where there was no doubt as to the legal liability; and the legal liability in such cases springs from the equitable obligation." Russell vs. Failor, 1 0. S. 327. Bartley, C. J'. : " The right of con- tribution among sureties i4 founded not in the contract of suretyship, but is the result of a general princi- ple of equity which equalizes bur- dens and benefits. The common law has adopted and given effect to this equitable principle on which a sure- ty is entitled to contribution from his co-surety. This equitable obli- gation to contribute, having been established, the law raises an im- plied assumpsit on the part of the co-surety to pay his share of the loss, resulting from a concurrent liability to pay a common debt." Bradley vs. Burwell, 3 Denio 61. Jewett, J. : " I think that the law implies a contract between co-sure- ties to contribute, ratably, towards discharging any liability which they may incur in behalf of their princi- pal, such contract originating at the time they execute the principal obligation." Agnew vs. Bell. 4 Watts (Pa.) 32, Kennedy, J. : " This right has been considered as depending rather RIGHTS ANB EEMEDIES. 47Y standing that if the principal failed to keep his engagement all who were collaterally bound for the same debt would share the loss, whether they made their contract at the same time or on the same instrument or not, and whether one co-surety had knowledge of the engagement of the other or not. A practical distinction arises between actions upon implied contracts and actions upon a purely equitable basis in the appli- cation of the Statutes of Limitations of the various States, and generally a longer period of limitation is applied in favor of actions cognizable in equity than, at law. It was held in Wisconsin that the right of contribution rests upon implied contract and therefore barred in six years, and that the limitation of ten years as to actions in equity did not apply."^ §263. Contribution between sureties bound by different instru- ments. If several promisors are bound for a common burden even though by separate instruments they will be liable to contribute to each other."' upon a principle of equity than up- 102 Buahnell vs. Bushnell, 77 Wis. on contract; but it may well be con- 435; 46 N. W. 442. The Statutes of sidered as resting alike on both for Limitation in Wisconsin provide a its foundation; for although, gen- limitation of six years upon an ac- erally, there is no express agreement tion on any contract, obligation or entered into between joint sureties, liability, express or implied (Sec. yet from the uniform and almost 4222, Sub. 3), and ten years upon an universal understanding which action cognizable in equity (Sec. seems to pervade the whole com- 4221, Sub. 4). ' munity, that from the circumstance The same distinction for the pur- alone of their agreeing to be, and pose of applying the statute of limi- becoming accordingly co-sureties of tations is made in Ohio. Neilson & the principal, they mutually be- Churchill vs. Fry, W 0. S. 652. come bound to each other to divide See also Tate vs. Winfree, 37 S. and equalize any loss that may E. (W. Va.) 9S6. arise therefrom to either or any of In Greorgia the action is governed them, it may with great propriety by same statute which limits the be said that there is at least an im- action on the principal obligation, plied contract." Train vs. Emerson, 80 S. E. 534. See also Lansdale's Admrs. vs. "s Deering vs. Winohelsea, 2 B. Cox, 7 T. B. Mon. (Ky.) 401; Bach- & P. 270; Schram vs. Werner, 83 elder vs. Fiske, 17 Mass. 464. Jlun 293; 32 N^. Y. S. 99S. 478 THE LAW OP SUKETYSHIP If the undertakings are for different amounts their liability in contribution will be in proportion.^"* In the matter of contribution between sureties bound by dif- ferent instruments the rule is the same whether the sureties are each bound for an aliquot part of the debt or for the entire debt. If the latter, the relation between the sureties is the same in all respects as if they had joined in one instrument. ^°° If, however, the liability for an aliquot part is further limited so that the non-payment by one surety does not affect the amount to be paid by any other surety, they are held not to be co-sureties and so not liable in contribution.^"^" Where successive bonds are cumulative, the right of contribution arises, and covers such liability as is common to both.^"' Contribution between sureties upon different instruments will not be allowed except they each relate to the same transaction. It is not sufficient that they secure liabilities which arise out of the same duty. If several bonds or obligations are given to indemnify against the default of another growing out of the same transaction, the promisors will be co-sureties, even though their respective liabil- "The obligation of co-sureties to Pr. 6; Ketler vs. Thompson, 13 contribute to each other has grown Bush (Ky.) 2i87; Dugger vs. out of that favorite rule of equity Wright, 51 Ark. 232; 1.1 S. W. aiS; that equality is equity. It is not Powell vs. Powell, 48 Cal. 234. at all founded upon the idea of con- ifsa Assets Realization Co. vs. tract between sureties, and may be American Bonding Co. et al., 8'8 0. Invoked by the one against the other S. 2'16; 102 N. E. 719. when he has been compelled to pay los Rudolf vs. Malone, 104 Wis. for the principal debtor, although 470; 80 N. W. 743; Cobb vs. without any knowledge down to the Haynes, 8 B. Mon. (Ky.) 137; Steiv- time of payment or later that his ens vs. Tucker, 87 Ind. 109. co-surety has also obligated himself Bell vs. Jasper, 2 Ired. Eq. (N. to pay the same debt. Nor will their C.) 597. In this case the sureties beconiing sureties at different times upon a guardian's bond for $10,000 and by different instruments with- asked to be released, which was done, out the knowledge of each other and a new bond of $5,000 /executed, affect their liability to contribute a loss of $4,000 having occurred one to the other as co-sureties." while the first bond was in force, Bright vs. Lennon, 83 N. C. 193. which the first sureties paid, the 104 Armitage vs. Pulver, 37 N. Y. first sureties were allowed contribu- 494 ; Jones vs. Blanton, 6 Ired. Eq. tion against the second for their pro (N. C.) 115; Young vs. Shunk, SO rata share of the loss. Minn. 503; 10 N. W. 402; Elles- But see Burne;tt vs. Millsaps, 5i9 mere Brewing Co. vs. Cooper, 1' Q. Miss. 333, where it is held that the B. L. R. 75 ; Fidelity & Deposit Co. several sureties should contribute vs. Phillips, 84 Atl. 432. equally up to the amount of the 105 Hughes vs. Boone, 81 N. C. smaller bond. To the same effect see 204; Bergen vs. Stewart, 2« How. Cherry vs. Wilson, 78 N. C. 'Ii64. BIGHTS AND KEMEDIKS. 479 ities are limited to a part of the saia secured. But if the under- takings are for distinct parts of the debt of the piincipal, as dis- tinguish«d from the undivided part of the whole, the promisors are not co-sureties and cannot enforce contribution. Thus where one wishing credit for a definite amount, engaged to furnish three bonds each for an amount equal to one-third of the sum to be secured. It was considered that each bond was a distinct transaction, and not so related to the others as to enable one who paid his bond to have contribution.^"" If in the course of legal proceedings for the collection of a debt for which another is already bound as surety, an additional security such as a stay or appeal bond is given, the successive undertakings, although securing the same debt, do not arise out of the same transaction, and the relation of co-sureties does not exist, but the separate sets of sureties must exonerate each other in the inverse order in which they were given.^"* Where one of three co-sureties was given an indemnity bond by his principal against his liability as surety, and default be- ing made, paid the full amount, and afterwards recovered the amount paid from the surety on the indemnity bond, it was held that the indemnity surety was not thereby made co-surety with other sureties on the original bond, and could not enforce contribution from them.^°° lo' Coope vs. Twynam, Turn. & Va. 121; Dunlap vs. Foster, 7 Ala. Russ. 426. In this case each bond 734. was for £400 and payable at different loo Gibson vs. Shehan, 5 App. D. periods, and neither surety was li- C. 391. This case was decided upon able to the creditor for any part of the theory that since the indemnity the debt except the particular sum surety was a Surety Company to' described in his undertaking, al- whom a premium had been paid by though each portion of the debt was the principal that the entire penalty contracted for at one time, and tak- of the bond constituted a trust fund en together constituted an entire to which the other eo-sureties might contract as between the debtor and resort. But if the indemnity bond creditor. had been executed by a private sure- los Friberg vs. Donovan, 23 111. ty, such surety would not be entitled App. 58; Pott vs. Nathans, 1 Watts to have contribution with the other & Serg. (Pa.) 155; Brandenberg vs. sur"Bties in the original transaction, Flynn's Executor, 12 B. Mon. (Ky.) as \he indemnity bond constitutes 397; Chrisman vs. Jones, 34 Ark. an entirely different transaction, 73; Rosenbaum vs. Goodman, 78 and is not bound at all for the orig- 480 THE LAW OF SUEETYSHIP. §264. A surety for a surety not liable in contribution. A supplemental surety, or one who engages to answer for the default of another who has already become bound as a promisor in suretyship, is not liable to contribution, since as to such prom- isor the earlier surety is in the relation of a principal debtor. This is illustrated by the ordinary cases in which two or more persons become separate and suceeissive indorsers upon pron^s- sory notes. If they are regular indorsers in the chais. of title, the last undertakes that the first shall pay, and if the first does pay the later indorsers are fully exonerated. This is because they are sureties for the earlier indorsers and not with them. The same is true of successive accommodation indorsers in the absence of special agreement to be jointly bound.^^° If one of several sureties stipulates with the debtor or cred- itor that he assumes the liability only as surety for those who precede him, he will be bound in no other way. It adds nothing to the liability of the earlier signers that another has undertaken to answer for them, and the equity of contribution is overcome by the superior legal contract right of the later promisor who signs upon such condition.^^^ If the last one of a series of accommodation indorsers adds the word " surety " to his name, the others being signed in inal debt, but merely for such sums 439; Schram vs. Werner, 85 Hun. as are coerced from a surety for the 293 ; 32 N. Y. S. 995 ; Hamilton vs. original debt. Johnston, 82 111. 39; Adams vs. But see American Surety Co. vs. Flanagan, 36 Vt. 400; Boulware vs. Boyle, 65 0. S. 486; 63 N. E. 73, in Hartsook, 83 Va. 679; 3 S. E. 289; which an apt criticism of Gibson vs. Baldwin vs. Fleming, 90 Ind. 177; Shehan (ubi supra) is made, where- Hanish vs. Kennedy, 106 Mich. 455; in the Court says, "Analysis shows 64 N. W. 459; Singer Mfg. Co. vs. that it applies a general rule to a Bennett, 28 W. Va. 16. case which is not comprehended by Where a co-surety claims that his it because not within its reason." contract is anything else than what 110 Post, Sec. 278 ; McDonald vs. it purports to be on its face, such McGfuder, 3 Pet. 470; McCarty vs. as that he is a surety for and not Roots, 21 How. 432. with another, the burden is on him 111 Bulkeley vs. House, 62 Conn, to show such fact. Carr vs. Smith, 469; 26 Atl. 352; Mulkey vs. Tern- 129 N. C. 232; 39 S. E. 831. pleton, 60 iS. W. (Tex. Civ. App.) EIGHTS AND REMEDIES. 481 blank, the presumption arises that the last signer is surety for the others."^ In the absence of all stipulation on the instrument itself, the conditions under which the various parties sign may be shown by parol, and if a mutual understanding between the surety and either the debtor or creditor be established that the liability of co-surety is not assumed, contribution will not be enforced, even though the earlier surety had no notice of the arrangement.^" It is held that the stipulation' limiting the liability to that oi a surety for the prior parties is ineffectual where the prior par- ties contract on the condition that those who sign later shall be- come co-sureties.^^* §265. Contribution as affected by special contract between sure- ties. The relation between several obligors on a suretyship contract may generally be shown, and if some have agreed with the others to assume a larger liability as between themselves, it would be manifestly an anomaly in equity to permit one party to the agreement to violate his compact and assert his so called " equity " of contribution because some rule of evidence did not permit the agreement to be shown. The right to show by parol an agreement between co-sureties, as affecting their rights and liabilities in contribution, is not covered by the Statute of Frauds. Where one surety promises his co-surety that he will respond to a larger liability than the equity of contribution would put upon him by operation of law, »i2Sayles vs. Sims, 73 N. Y. 551. Paschal, 70 Mo. App. 117; Schram In Harris vs. Warner, 13 Wend. vs. Werner, 85 Hun 293; 32 N. Y. 400, there were four sureties, the S. 995 ; Oldham vs. Broom, 28 0. S. first three added the word " surety " 41. to their names, and the last added n* Grouse vs. Wagner, 41 O. S. " surety for the above names," and 470. it was held that contribution could But see Bobbitt vs. Shryer, 70 not be enforced against the last Ind. 513; Melms vs. Werdehoff, 14 surety. Wis. 18; Adams vs. Flanagan, 36 "aCraythorne vs. Swinbourne, 14 Vt. 400; Sherman vs. Black, 49 Vt. Vea. Jr. 160; Chapeze vs. Young, 87 198. Ky. 476; 9 S. W. 399; Leeper vs. 482 THE LAW OF SURETYSHIP. he in effect, promises to indemnify him against his liability as a surety for that part in excess of the amount agreed upon. Such promise of indemnity may be shown by parol.^^° Thus where a surety upon an official bond stipulated with his co-surety that he was to be liable for only one-third of any de- fault that should be made, and he afterwards paid one-half the default, and brought action to recover from his co-surety upon the parol agreement, the amount he had paid in excess of his agreement, it was held, " Co-sureties may by contract, agree- ment or understanding between themselves, limit and fix the proportion and extent of their several or correlative liability and it is competent to establish the agreement by parol." ^^° §266. Contribution between persons in the situation of a surety. Where a liability exists to pay the debt of another and the obligation is satisfied, a right of contribution arises against all who were bound for the same duty even though the suretyship relation was involuntary. The party paying being placed in the situation of a surety, the equity of contribution arising in favor of a regular surety will apply. In a case where brokers holding notes of thei"r customers for sale, fraudulently pledged them for their own debt, the sev- eral owners of the notes were considered as being in the situa- tion of sureties for the debt of their brokers^ and the maker of one of the notes being called upon for payment it was held that he was entitled to contribution from, the others similarly sit- uated."' iiB Thomas vs. Cook, 8 Barn. & See also Ante Sec. 32. Cr. 728; Wildes vs. Dudlow, L. R., neRose vs. WoUenberg, 31 Ore- 19 E.q. 198 ; Guild vs. Conrad, L. E,., gon, 269 ; 44 Pac. 382. 2 Q. B. Div. 885 ; Chapin vs. Merrill, See also Hoggatt vs. Thomas, 35 4 Wend.. 657 ; Blake vs. Cole, 22 La. Ann. 298. Pick. 97 ; Horn vs. Bray, 51 Ind. Contra — Wolverton vs. Davis, 85 555; Ferrell vs. Maxwell, 28 O. S. Va. 64; 6 S. E. 619. 383; Barry vs. Ransom, 12 N. Y. nfMcBride vs. Potter-Lovell Co., 462 ; Baldwin vs. Fleming, 90 Ind. 169 Mass. 7 ; 47 N. E. 242. In this 177; Mansfield vs. Edwards, 136 case the several notes were in dif- Mass. 15. terent sums and fell due at different EIGHTS AND EEMEDIES. 483 In those States where stockholders of a corporation are indi- vidually liable to assessment for the payment of oorporate debts, they are thus placed in the situation of a surety, and if one stockholder pays more than his proportionate share he is entitled to contribution from the others/^* §267. One who becomes surety at the request of a co-surety is liable in contribution to such co-surety. It has been held that if one becomes surety at the request of a co-surety, the latter will be presumed to make the request in furtherance of a purpose of his own, and a promise of in- demnity to him will be implied. In an early case Lord Kenyon assumed it to be beyond ques- tion that a surety signing upon invitation of his co-surety is exempt from contribution, stating his view thus : " I have no doubt that where two parties become joint sureties for a third person, if one is called upon and forced to pay the whole of the money, he has a right to call on his co-surety for contribution ; but where one has been induced so to become surety at the in- stance of the other, though he thereby renders himself liable to the person to whom the security is given, there is no pretense times, Allen, J. : " These differences ability, thus making them all sure- do not vary the equitable rights ties for itself. It might be that and liabilities of the parties as under such circumstances the amongst themselves. The liability pledgee would prefer to hold one to contribute does not depend on a and exonerate another, and it would contract between the parties who have power to do so in the first are held liable to contribute, and is instance by proceeding to collect of not affected by the fact that notes one, but not of another. But where were pledged and fell due and were several different parties have thus paid at different times, or that some been exposed to loss by the fraud of them were paid only in part or of their common agent, it is more not at all. The notes were all equitable that the burden of the loss pledged to secure the same indebted- should be shared pro rata. Under ness. The fact that some of them such circumstances equality is fell due at earlier dates than others equity, without respect to the times creates no equity in favor of those of the maturity of the notes." which fell due last. The various "8 Umsted vs. Buskirk, 17 0. S. parties selected a common agent, 114; Buchanan vs. Meisser, 105 111. and this agent used its power to 638; Wolters vs. Henningsan, 114 place them all under a common li- Cal. 433; 46 Pac. 277. 484 THE LAW OF SUEETTSHIP. for saying that he shall he liahle to be called upon by the person at whose request he entered into the security." ^" In nearly all the cases usually cited in support of the rule stated by Lord Kenyon the surety signing at the request of his co-surety was also indemnified, either by the written or verbal promise of the co-surety,^^° and this circumstance alone would prevent the one furnishing the indemnity from enforcing contri- bution. Unless there is some agreement or understanding to the con- trary the fact that one becomes surety at the request of a co- surety does not appear to furnish any reason for depriving the co-surety of contribution. " If a surety making the request, receive any personal benefit from the execution of the obligation — as where the money raised thereon goes into his hands, or where he has already in- curred a liability upon an instrument completed by delivery — we can see a propriety in the court treating the person thus bene- fited and making the request, as a principal, and the person signing at such request as his surety only and not liable to con- tribute for his benefit. So, where the signature is upon an express contract to indemnify, the consideration supports the promise and discharges the surety from the legal obligation otherwise resting upon him. But where parties standing in an equal relation to the principal sign as sureties for that principal, the one at the request of the other, we are not satisfied that any sound principle of law or equity will discharge either from the legal obligation he assimies on the face of the instrument to eon- tribute his proportion on default of the chief obligor.^''^ "8 Turner vs. Davies, 2 Esp. 478 ; But see Hendrick vs. Whittemore, Cutter vs. Emery, 37 N. H. 567; 105 Mass. 23. Where the court ap- Daniel vs. Ballard, 2 Dana (Ky.) proves the charge of the lower court 296. which was: " If the jury were satis- 120 Thomas vs. Cook, 8 Barn. & fied that the defendant signed the Cr. 728 ; Apgar vs. Hiller, 4 Zabr. bond as surety, at the request of or (N. J.) 812; Harris vs. Brooks, 21 being induced thereto by the plain- Pick. 195. tiff, then the plaintiff could not re- 121 Bagott vs. Mullen, 32 Ind. 332 McKee vs. Campbell, 27 Mich. 497 Burnett vs. Millsaps, 59 Miss. 3.33 Rhuford vs. Cook, 80 S. E. 61. cover, but if he signed at the request of the principal, though the request of the plaintiff was coupled with it. EIGHTS AND EEMEDIES. 485 §268. One who aids in the commission of the default is barred from the right of contribution. The proposition is self-evident that where one of two or more obligors in suretyship aids in the oommission of a default by the principal, either by his negligence or his active misconduct, he cannot assert a claim in contribution. Where the plaintiff and another were co-sureties of an admin- istrator and the action was to recover in contribution for losses paid by the plaintiff resulting from the failure of a bank in which trust funds were deposited, it was held that the plaintiff could not recover, it being shown, that the plaintiff as the at- torney of the administrator made the deposit, and although act- ing in good faith, yet as it was his own act which caused the loss, he could not claim that the defendant owed him any duty TO contribute.^^^ It was held that where a deputy sheriff was a surety upon the bond of the sheriff and recovery was had upon the bond of the latter for the wrongful act of the deputy, that no recovery in contribution could be had by the deputy. ^^' The misconduct of the surety which deprives him of contri- bution must be something more than a mere moral delinquency. The rule covers only such conduct as amounts to participation in the act which causes the loss. If the surety by his example or by his own solicitation leads the principal into habits of vice, which finally cause the principal to make default, the agency of the surety is too remote to deprive him of contribution. In the early case of Deering vs. Winchelsea ^''* heretofore con- sidered ^^^ it was claimed that the plaintiff seeking contribution had encouraged the principal in his irregularities by engaging with him in gaming and other extravagances which led to his that would not be defense in this Ga. 277; Simmons vs. Camp, 71 Ga. action." 54; Pile vs. McCoy, 99 Tenn. 367; 122 Eshleman vs. Boleniua, 144 Pa. 41 S. W. 10,^2. 269; 22 Atl. 758. But see Shepard vs. Pebbles, 38 123 Block vs. Estes, 92 Mo. 318; 4 Wis. 373. S. W. 731. 124 2 B. & P. 270. See also Scofield vs. Gaskill, 60 125 Ante Sec. 263. 486 THE LAW OF SUEETYSHIP. ruin, and the Court observed : " If these were circumstances which could work a disability in the Plaintiff to support his demand, it must be on the maxim, ' that a man must come into a court of Equity with clean hands ' ; but general depravity is not sufficient. It must be pointed to the act upon which the loss arises, and must be in a legal sense the cause of the loss. In a moral sense Sir E. Deering might be the author of the loss; but in a legal sense Thomas Deering was the author ; and if the evil example of Sir E. Deering led him to it, yet this was not what a court of justice could take cognizance of." §269. When contribution may be enforced. No right of contribution arises in favor of a co-surety who pays no more than his ratable share of the common burden. If one of two sureties pays one-half of the debt, he cannot call upon his co-surety to contribute to him even though his co-surety pays nothing to the creditor. If the latter sees fit not to enforce his demand against one of the sureties, it is no injury to the other."' To permit a co-surety to have contribution for each install- ment as he pays it, without regard to the amount of his share of i26Davies vs. Humphries, 6 M. & ly no right of action, which is W. 1 53, Parke, B. : " If a surety founded- on the equity to receive it." pays a part of the debt only, and See also Wallis vs. Swinburne, 1 less than his moiety, he cannot be Welsh. H. &, G. 203 ; Ex parte Snow- entitled to call on his co-surety, who den. In re Snowden, 17 Ch. Div. might himself subsequently pay an 44; Morgan vs. Smith, 70 N. Y. equal and greater portion of the 537; Camp vs. Bostwick, 20 0. S. debt; in the former of which cases, 337; Smith vs. State, 46 Md. 617; such co-surety would have no con- Pegi-am vs. Riley, 88 Ala. 399; 6 tribution to pay, and in the latter South. 753; Washington vs. Nor- he would have one to receive. In wood, 128 Ala. 383; 30 South. 405; truth, therefore, until the one has Weidemeyer vs. Landon, 66 Mo. paid more than his proportion, App. 520; Durbin vs. Kuney, 19 either of the whole debt, or of that Oregon 71; 23 Pac. 661; 61assf:ock part of the debt which remains un- vs. Hamilton^ 62 Tex. 143; Bushnell paid by the principal, it is not clear vs. Bushnell, 77 Wis. 435; 46 N. W. that he ever will be entitled to de- 442; Backus vs. Coyne, 45 Mich, mand anything from the other; and 584; 8 N. W. 694; Gordon vs. Eixey, before that, he has no equity to re- 86 Va. 853; 11 S. E. 562. ceive a contribution, and consequent- EIGHTS AND EEMEDIES. 487 the entire debt, would be a great inconvenience and result in a multiplicity of suits.^^"" If the payment by a surety of less than his moiety extinguishes the entire debt, the sum so paid represents the common burden and contribution arises. '^^'' The act of payment fixes the right of recovery in contribution and a demand and notice are not required as a basis of an ac- tion against the co-surety/^' Payn:i3nt may be made by the note of the surety, and the ac- ceptance of the note as payment by the creditor gives imme- diate right of contribution, and the right may be enforced even though the note is unpaid/^" and even though the maker of the note is insolvent.^*" Where a surety executed and delivered his note to the creditor and thereafter the creditor through motives of friendship can- celled it and returned it to him without payment, it was held that recovery in contribution might be had against his co- suretv/'^ It has been held that contribution can not be enforced against a co-surety, except where the surety paying is unable to recover from the principal by reason of the insolvency of the latter.^'^ But the general rule is that contribution may be enforced with- out regard to the financial condition of the principal. ^^^ 128(1 Stirling vs. Burdett, 2 Ch. 480; 35 S. E. 4018; Ryan vs. Krusor, 418. , 76 Mo. App. 496; Kixon vs. Beard, 12? Stallworth vs. Preslar, 34 Ala. Ill Ind. 137; 12 N. E. 131. oOB; Boutin ys. Estell, I'lO Wis. Contra. — Brisendine vs. Martin, 1 276; 85 X. W. 964. Ired. Law (N. C.) 286. 128 Mason vs. Pierron, 69 Wis. iso Owen vs. McGehee, 61 Ala. 440. 5»5; 34 X. W. 921; Vliet vs. Wyok- laiigtubbins vs. Mitchell, 82 Ky. off, 42 N. J. Eq. 642; 9 Atl. 679; 536. Parham vs. Green, 64 N. C. 4316. i32 Morrison vs. Poyntz, 7 Dana It was held in Neilson vs. Fry, (Ky.) 307; Poignard vs. Vernon, 1 16 0. S. 552, that the plaintiff can- T. B. Mon. (Ky.) 45; Glasscock not recover costs in contribution un- vs. Hamilton, 62 Tex. 143 ; Hall vs. less the co-surety is notified of the Gleason, 138 Ky. 789. amount paid for his account with a i'^ Mosely vs. Fullerton, 59 Mo. demand for payment. App. 143 ; Smith vs. Mason, 44 Nelb. 129 Smith vs. Mason, 44 Neb. 610; 610; 63 N. W. 41; Taylor vs. Rey- 63 N W. 41. nolds, 53 Cal. 686; Sloo vs. Pool, 15 See also Sloan vs. Gibbes, 56 S.C. 111. 47; Buckner vs. Stewart, 314 4,88 THE LAW OF STJBETYSHIP. §270. Equitable contribution — or the right of a surety to call upon his co-surety for exoneration before payment. The doctrine that a surety cannot enforce contribution until he has first paid more than his own proportion of the debt must yield to the superior equities of exceptional cases. If one of several co-obligors is called upon to pay the entire debt it will sometimes occur that a compliance with this demand would cause financial disaster to him, which his right of con- tribution after payment would not prevent. This contingency has been stated thus : " Obviously if a man were surety with nine others for £10,000, it might be a ruinous hardship if he were compelled to raise the whole £10,000 at once and perhaps to pay interest on the £9,000 until he could recover the £9,000 by actions or debtor summonses against his co-sureties." ^^* It is clear that some form of equitable contribution, without requiring payment to be first made, is necessary to meet such .cases. This is ordinarily accomplished by a bill in equity, brou^t by the surety called upon for the entire debt, directed against his co-surety, praying for an order requiring the co- surety to pay to the creditor his contributory share of the com- mon burden. Such procedure enables one who is entitled to contribution and indemnity from his co-obligor to prevent loss and perhaps ruin, and is a reasonable expression of the highest equity."^ Ala. 529; Goodall vs. Wentworth, business would be greatly embar- go Me. 322; Eankin vs. Collins, 50 rassed, that she was willing to pay Ind. 158; Boutin vs. Etsell, 110 her proportion, and asks for an or- Wis. 276; 85 N. W. 964. der requiring the co-sureties to pay 134 Wolmershausen vs. GuUiek, L. to the creditor their respective R., 2 Ch. Div. (1893) 514. shares. The Court granted the re- 135 In the case of Wolmershausen lief, stating: "I think that I can vs. Gullick (ubi supra) demand was declare "the Plaintiff's right, and made upon one of five sureties for make a, p.ospective order under the payment of the entire debt, which, whenever she has paid any which was a large sum, and the bill sum beyond her share, she can get alleges that if the plaintiff were it back, and I therefore declare the obliged to withdraw so large an Plaintiff's right to contribution, and amouBt from her business that the direct that, upon the Plaintiff pay EIGHTS AND EEMEDIES. 489 The surety may also have equitable contribution enforced where the co-surety is about to make a fraudulent conveyance of his property. Under these circumstances it would be a mani- fest hardship against the surety to require him to first adjust his liability to the creditor before talking steps to restrain the fraudulent act of his co-surety/'" §271. Amount recoverable in contribution. In addition to the contributory share of the debt, the surety who is called upon for payment by the creditor may recover from his co-surety his share of the costs of the litigation insti- tuted by the creditor in establishing the amount due/'' and other expenses incurred in a defense of the claim undertaken in good faith, such as counsel fees.^'' The surety paying the contributory share of his co-surety is entitled also to recover interest on the amount paid.^'° Contribution can be had only for the amount actually paid with interest and expenses, and if the surety pays in property of less value than the amount of the debt,'*" or buys up the claims against the debtor for less than their face value,'*' he must settle with his co-sureties on the same basis. ing her own share, the Defendant Wagenaeller vs. Prettyman, 7 111. Gullick is to indemnify her against App. 192; MeKee vs. Campbell, 27 further payment or liability, and is, Mieh. 497 ; Kemp vs. Tinden, 12 M. by payment to her or to the princi- & W. 421. pal creditor or otherwise, to exon- i38 Boutin vs. Etsell, 110 Wis. erate the Plaintiff from liability be- 276; 85 N. W. 964; Van Winkle vs. yond the extent of her own share." Johnson, 11 Oreg. 469; 5 Pac. 922; See also Hodgson vs. Baldwin, 65 vGross vs. Davis, 87 Tenn. 226; 11 111. 532; Hyde vs. Tracy, 2 Day '^. W. 92. (Conn.) 491; Ferrer vs. Barrett, 4 is^Lawson vs. Wright, 1 Cox Jones Eq. (N. C.) 455. 275; Ex parte Bishop, 15 Ch. Div. Post Sec. 28'!. 400; Buckmaster vs. Grundy, 8 111. i86Bowen vs. Hoskins, 45 Miss. 626; Smith vs. Mason, 44 Neb. 610; 183; Smith vs. Eumsey, 33 Mich. 63 N. W. 41; Backus vs. Coyne, 45 183; Pashby vs. Mandigo, 42 Mieh. Mich. 584; 8 N. W. 694. 172; 3 N. W. 927. i" Jones vs. Bradford, 25 Ind. 1" Security Ins. Co. vs. St. Paul 305 ; Edmonds vs. Sheahan. 47 Tex. Ins. Co., 50 Conn. 233; Marsh vs. 443. Harrington, 18 Vt. 150; Bright vs. i*i Derosset vs. Bradley, 63 N. C. Lennon, 83 N. C. 183; Gross vs. 17; Tarr vs. Ravenscroft, 12 Gratt, Davis, 87 Tenn. 226; 11 S. W. 92; 642. 490 THE LAW OF SUKETYSHIP. §272. Contribution as affected by the insolvency of one or more co-sureties. In determining the amount which each co-surety should con- tribute, those who are insolvent will be excluded, and the bur- den divided among those who are solvent. There would seem to be no reason why this rule, if applied at all, should not have equal force whether the action for con- tribution arises at law or in equity. In either forum the rem- edy of contribution is enforced upon the theory that equity will not permit one to be charged with a greater share of a common burden than his co-obligors. It has, however, been held in some jurisdictions that the in- solvent co-surety will be excluded only when the action for con- tribution is brought in equity. ^*^ But the generally accepted rule is that the inherent equities of the doctrine of contribution will be as fully administered at law as in equity, and that the insolvent surety will be excluded from the calculation.^*^ §273. Contribution as affected by absence from the jurisdiction or by the death of a co-surety. All solvent co-sureties within the jurisdiction in which an equitable action for contribution is brought must be joined as 142 Moore vs. Bruner, 31 111. App. some cases which hold that in an 400|»Gross vs. Davis, 87 Tenn. 226; action for contribution the question 11 S. W. 92; Acers vs. Curtis, 68 of the solvency or insolvency of the Tex. 423 ; 4 S. W. 551 ; Trego vs. oo-sureties is not material, but that Estate of Cunningham, 267 111. 367; the one paying the debt is entitled 108 N. E. 350. ^g recover contribution without re- 12l1^ZlZ'^:.T!..i1ol.'lA;i. ^-^ to the insoWy of any of 672 ; 38 N. E. 484 ; Sloan vs. Gibbes, tn^m. The better and the more 56 9. C. 480; 35 S. E. 408; Liddell equitable rule, one supported by the vs. Wiswell, 59 Vt. 365; 8 Atl. 680. weight of authority, and which we ISmith vs. Mason, 44 Neb. 610: 63 think should obtain, is that eontri- N. W. 41, Norval, C. J.: "Ordina- , ,. 4. i, v j ii, •i iT i 1 „*•„„ bution must be based upon the num- rily,. where one of several sureties, '^ who are equally bound, pays the ber of solvent co-sureties. In other debt, he is entitled to recover as words, the insolvent ones are to be contribution from the solvent sure- excluded, and the burden must be ties a pro rata _share of the amount distributed between those whc are 80 paid, with interest. There are solvent.' RIGHTS AND REMEDIES. 491 defendants."* But if some are absent from the jurisdiction it does not constitute a bar to an action against the others, and those absent will be excluded, and the entire burden distributed among the ones remaining/*^ , A surety in whose favor the statute of limitations has not run, who has done nothing to suspend its operation, and who has been compelled to pay the debt of his principal may exact contribution from a co-surety in another state, though under the laws thereof the creditor's claim against the latter was barred when the principal's debt was paid.^*^^ If a co-surety dies, the obligation to contribute devolves upon ^ his legal representatives. In this respect it is like any other contract to pay money at a future time upon a contingency, and it is not necessary that the breach should occur before the promisor dies.^*° If the estate has been administered, and the assets distributed to the heirs before the cause of action in contribution arises, the contributory share of the decedent may be recovered from the iheirs.^*' §274. Surety seeking contribution must account to his co-sureties for indemnity furnished him by the principal. If a surety receives indemnity from the principal he holds it in trust for the equal benefit of all the co-sureties, and their pro rata share of the indemnity, if the indemnity has been re- duced to money, must be deducted from their prospective lia- bilities before recovery can be had in contribution, or if the l<4 Johnson vs. Vaughn, 65 111. l^6o Frew vs. iScoular, 101 Neb. 425; Adams vs. Hayes, 120 N. C. 131; 162 N. W. 496;, Ann. Cases 383; 27 S: E. 47; Bruce vs. Bicker- 1918E, 511, note, ton, 18 W. Va. 342; Young vs. 146 Bachelder vs. Fiske, 17 Mass. Lyons, 8 Gill (Md.) 162. 464; Johnson vs. Harvey, 84 N. Y. Because of the fact that the liabil- 363; Egbert vs. Hanson, 70 N. Y. S. ity of co-sureties is considered sev- 383 ; Tarr vs. Eavenscroft, 12 Gratt. eral rather than joint, a technical 642; Handley vs. Heflin, 84 Ala. objection to a joinder would arise if 600 ; 4 South. 725 ; Conover vs. Hill, the action is brought at law, ex- 76 111. 342; Sanders vs. Weelburg, cept where the code provides for 107 Ind. 266; 7 N. E. 573; Hecht vs. joining as defendants all persons iSkaggs, 53 Ark. 291 ; 13 iS. W. 930; having an interest in the contro- Pace vs. Pace, 95 Va. 792 ; 30 S., E. versy. Daum vs. Kehnast, 18 0. C. 361. C. 1. 147 Stevens vs. Tucker, 87 Ind. 14S Security Ins. Co. vs. St. Paul 109; Williams vs. Ewing, 31 Ark. Ins. Co., 50 Conn. 233; Faurot vs. 229; Gibson vs. Mitchell, 16 Fla. Gates, 86 Wis. 569; 57 N". W. 294; 519. 'Stewart vs. Goulden, 52 Mich. 143 ; See also Zollickoffer vs. Steth, 44 17 N. W. 731 ; Currier vs. Baker, 51 Md. 359. N. H. 613; Liddell vs. Wiswell, 59 Vt. 365; 8 Atl. 680. 492 THE LAW OF SURETYSHIP. value of the indemnity has not been established before contribu- tion is enforced, the co-sureties may recover back from the indemnified surety their proportionate share, as it shall be finally ascertained. In a well considered English case two of four sureties were indemnified by a bill of sale of personal property. They paid the debt, and their co-sureties contributed in equal proportions and afterwards brought suit to recover their share of the in- demnity. The plaintiffs had no knowledge of the indemnity at the time they signed, and the bill of sale to the defendants contained the stipulation that the indemnity was exclusively for the defendants, and that the plaintiffs should not have the benefit of the security or any part of it; the court held the plaintiffs were entitled to the relief sued for.^*^ Indemnity in the hands of one co-surety will inure to the benefit of other sureties who make their contract at a later period, as where a public officer gives an additional bond as required by law, the last sureties if sued in contribution will 148 steel vs. Dixon, 17 Ch. Div. ( 1881 ) 82B, Fry, J. : " In my opin- ion the Plaintiffs are entitled to share in the benefit secured by the deed of the Defendants. In coming to that conclusion, I base myself on the general principle applicable to co-sureties, as established by the well-known and often-cited ease of Deering vs. Earl of Winchelsea, the short effect of which I take to be that, as between co-sureties, there is to be equality of the burden and of the benefit If that be the case, it follows that each surety must bring into hotchpot every bene- fit which he has received in respect of the suretyship which he under- took, and if he" has received a bene- fit by way of indemnity from the principal debtor, it appears to me that he is bound, as between himself and his co-sureties, to bring that into hotchpot, in order that it may be ascertained what is the ultimate burden which the co-sureties have to bear, so that that ultimate burden may be distributed between them, equally or proportionably, as the case may require." See also Berridge vs. Berridge, 44 Ch. Div. 168; Vandiver vs. Pollak, 107 Ala. 547; 19 South. 180; Sim- mons vs. Camp, 71 Ga. 54; Keiser vs. Beam, 117 Ind. 31; 19 N. E. S34; Neely vs. Bee, 32 W. Va. 519; 9 S. E. 898; Barge vs. Van 0er Horck, 57 Minn. 497; 59 N. W. 630; Hoover vs. Mowrer, 84 Iowa 43; 50 N. W. 62; Fuller vs. Hapgood, 39 Vt. 617; Teeter vs. Pierce, 11 B. Mon. 399; Scribner vs. Adams, 73 Me. 541; Smith vs. Conrad, 15 La. Ann. 579; Baber vs. Hanie, 183 X. C. 588; 80 S. E. 67. filGHTS AND EEMEDIES. 493 be entitled to have credited to them a share in the indemnity furnished the earlier sureties.^*" If one is surety for several debts of the same principal and holds indemnity for his liability, each of the several sets of co-sureties are entitled to off-set a pro rata share of the in- demnity against a claim for contribution."" The fact that the surety paying owes the principal does not put him in the situation of one holding indemnity, and consti- tutes no defense to an action for contribution/''^ Where one or more sureties have been indemnified, and the indemnity furnished is released or restored to the principal, it ■will constitute a defense to the action of such surety for con- tribution to the extent of the ascertained value of the security."^ The same rule applies if the surety by his negligence causes the indemnity to be lost or wasted.'^'*'' Where judgment was entered against the principal for the debt, and one co-surety became the purchaser of property of the principal taken in execution to satisfy such judgment, it was held that in an action for contribution he must accoimt to 14S) Farmers Bank vs. Teeters, 31 excess of the proportion properly ap- 0. S. 36. plicable to the debt which had been 150 Mueller vs. Barge, 54 Minn. paid in full, and it was held that the 314; 56 N. W. 36; Brown vs. Ray, surety who was thus called upon to 18 N. H. 102. refund his indemnity, might recover See also Wilson vs. Stewart, 24 0. in contribution from the co-surety S. 504. In this case a surety held a, who was exonerated by the original mortgage of indemnity to secure him application of the indemnity, against loss by reason of his surety Contra — Titcomb vs. McAllister, ship in several transactions, in each 81 Me. 399; 17 Atl. 315. of which he had co-sureties. He ap- isi Davis vs. Toulmin, 77 N. Y. plied a part of the indemnity in full 280. settlement of one debt, thus com- But see Bezzell vs. White, 13 Ala. pletely exonerating his co-sureties 422. in that transaction, and' the balance 152 Paulin vs. Kaighn, 29 N. J. L. of tlie indemnity he applied pro rata 480. upon the other debts. The co-sure- i^a Steele vs. Mealing, 24 Ala. ties upon the debts not settled in 285 ; Frink vs. Peabody, 26 111. App. full, paid the deficiency, and recov- 390; Chilton vs. Chapman, 13 Mo. ered from the indemnified surety so 470, much of the indemnity as was in 494 THE LAW OF SUKETYSHIP. his co-sureties for the real value of the property without regard to the price at which he had bid it in at the execution sale."* The surety is not barred from his remedy in contribution merely by the fact that he holds security,"^ and there can be 1E4 Sanders vs. Weelburg, 107 Ind. 266; 7 N. B. 573, Eowh;C. J.: " It is claimed cfn behalf of the appel- lant, that he purchased the property of the principal in the judgment, at public sales thereof by the sheriff of the county, where all parties, the appellee included, had the right to appear and bid therefor ; that he had the lawful right to purchase such property, at such sales, and as no one would or did bid more therefor than he, to purchase the same at and for the amount of his several bids, without regard to the actual value thereof; and that, having so pur- chased such property, he cannot be required to account therefor even to the appellee, as his co-surety, at its actual value, or at any greater value than the aggregate amount of his several bids Appellant, having fully paid and satisfied the judgment to the judgment creditor or plaintiff, by means of such pay- ment, acquired at the time a, cause of action against the appellee, as his co-surety in such judgment; but in his suit on such cause of action, it is clear, we think, that under our law he could not recover of the ap- pellee any more than she was ' equi- tably bound to pay.' Prima facie, ap- pellee as the co-surety of appellant was liable to him for one-half of the sum paid by him to ihe judgment plaintiff, in satisfaction of such judgment; but this prima facie li- ability was subject to reduction by whatever sum could be realized from the property of the principal in such judgment. The property of the prin- cipal in the judgment was a common fund for the benefit and protection of both the sureties alike, the ap- pellee as well as the appellant. . , . . We do not decide, in this case, that appellant did not have the right to sue out execution on the judgment, and procure the sale by the sheriff of the principal's proper- ty; for this right he clearly had. What we do decide is that if the ap- pellant, at such sales, purchased the property of the principal, at com- paratively nominal prices, and then sued his co-surety for contribution, she had the right, in bar of such suit, to show, as she did, that such property, at its fair value, was more than sufficient to satisfy such judg- * ment." But see Elrod vs. Gastineau, 124 Ky. 609; 99 iS. W. 903. 155 Williams vs. Kiehl, 127 Cal. 365 ; 59 Pac. 762, Cooper, C. : " Why should the plaintiff, in an action for contribution, after having paid out his money, be compelled to wait un- til he can realize upon some col- lateral indemnity which may require years, while his co-surety, who was as much bound in Jaw and morals as himself by the bond, has paid noth- ing ? This would not make the bur- dens of the co-sureties equal. The indemnity is for the benefit of one co-surety as much as for the other, no matter which holds it. Either one could apply to the court for its sale, or to enjoin a wrongful disposition of it. The burden of finding a. market for it and applying its value toward the debt of the principal should be borne by one as well as the other. There is no reason why EIGHTS AND EEMEDIES. 495 no off-set on account of the indemnity unless its value is ascer- tained, either by reducing it to money or otherwise. Where the surety has indemnity to secure his liability in suretyship and also to secure a debt owing him by the prin- cipal, the equity of bis co-sureties in the indemnity is superior, and he cannot apply the security to his own debt without re- leasing his claim for contribution.^"" §275. Surety may enforce contribution even though payment by him was without compulsion. Whenever the debt matures a surety may pay the same and enforce contribution, even though no demand is made . upon him by the creditor. It is not necessary to wait for the liabil- ity ^0 be fixed by judgment, nor for suit to be started or threatened. If a breach of the principal contract has occurred so that action might be maintained on the suretyship undertaking, a payment by the surety or guarantor is not voluntary.^"'' But if the surety paying might have successfully resisted the claim, the payment must be considered voluntary, and contribu- tion will not be allowed. Thus where a "judgment creditor was enjoined from levying execution upon the property of a stran- ger to the judgment, and after dissolution the surety upon the injunction bond paid the judgment without any adjudication against himself, it was held that the payment was volimtary, and that he could not recover contribution from his co-sureties as tliere was no liability on the bond to pay the judgment, but the co-surety who has paid the debt Y. 587; 53 N. E. 504; Labbe vs. Ber- of his principal should assume the nardy, 19'6 Tnd. 561; 82 N. E. 688. burden of disposing of the indem- But see Sanders vs. Weitermark, nity, and the additional burden of 20 Tex. Civ. App. ITS; 49 S. W. 900. waiting until it is disposed of, be- i^r Martin vs. Ellerbe's Admr., 70 fore he can receive from his co-sure. Ala. 326 ; Bradley vs. Burwell, 3 ty his proportion." Denio (X. Y.) 61; Hichbom vs. Mosely vs. Fullerton, 59 Mo. App. Fletcher, 66 Me. 209 ; Skrainka vs. M3; Johnson vs. Vaughn, 65 111. Eohan, 18 Mo. App. 341 ; Hardell vs. 425. Carroll, 90 Wis. 3150; 63 N. W. 275; But see Morrison vs. Taylor, 21 Glasscock vs. Hamilton, 62 Tex. 143. Ala. 7719. Contra — Stockmeyer vs. Oertling "6 Sherman vs. Foster, loiS N. 35 La. Ann. 467. 4^6 THE LAW OF SURETYSHIP. merely to respond in damages if it should turn out that the property sought to be reached in execution was the property of the judgment debtor.^^* So also if the claim against the surety is barred by the stat- ute of limitations, its payment will be voluntary, and recovery cannot be had in contribution against the co-surety/"" If one surety pays a note which is void on account of usury he cannot recover contribution. '^®° Where a surety pays to prevent a default by the, principal, he cannot thereafter recover from his co-sureties in contribu- tion. Such voluntary payinent extinguishes the principal con- tract and prevents the occurrence of the condition which fixes ft liability upon the sureties.^*^ los Halsey vs. Murray, 112 Ala. J 85; 20 South. 575. See also Nixon vs. Beard, 111 Ind. 137; 12 N. E. 131. 159 Dussol vs. Briiguiere, 50 Cal. 456 ; Maehado vs. Fernandez, 74 Cal. 362; 16 Pac. 19; Hatehett vs. Pe- gram, 21 La. Ann. 722; Turner vs. Thorn, 89 Va. 745; 17 S. E. 323; Hooper vs. Hooper, 81 Md. 155; 31 Ail. 508; Godfrey vs. Rice, 59 Me. 308 ; Green vs. Milbank, 56 How. Pr. 3.82; Gronna vs. Goldammer, 26 N. D. 122; 143 N. W. 3!94. But see Jones vs. Blanton, 6 Ired. Eq. (N. C.) 115. Bright vs. Lennon, 83 N. C. 183. Holding that a surety is not barred from pontrjbutios by failure to plead the statute of limitations. It is also held that a surety may waive a defense, sueh as the altera- tion of the principal contract, with- out impairing his right of contribu- tion. Houck vs. Graham, 106 Ind. 195; 6 N. E. 594. 180 Russell vs. Tailor, 1 0. S. 327. In this case the surety paying had knowledge of the usury but the de- cision does not appear to turn upon that fact. But see Warner vs. Morrison, 3 Allen, 566, Bigelow, J. : " It does not appear that the plaintiff had Icnowledge that there was any usu- rious and corrupt agreement between the payee of the note and the prin- cipals. Without such knowledge he could make no defense. If the hold- er of the note had sued him, he could not have successfully resisted his liability for the balance due up- on it, unless he knew that a for- feiture of part of the debt had been incurred by usury. His voluntary payment of the note after its ma- turity was therefore in compliance with the terms of the contract into which he had entered, and creates a valid claim for contribution. A surety having no defense, is bound to pay the debt. He is not obliged to incur the costs of defending an ac- tion. If he does, he cannot recover such costs of his co-surety, unless authorized by him to make a defense to the suit." leiLadd vs. Chamber of Com- merce, 37 Oreg. 49; 60 Pac. 713; 61 Pac. 1127; 62 Pac. 208. A loan of a large sum was made by The Cham- ber of Commerce of Portland to en- able it to erect a building; thirteen EIGHTS AND EEMBDIES. 497 Where one obligor pays the debt before maturity at the re- members of the organization guaran' teed the repayment of the loan in the form of a bond to the creditor conditioned that the building would be completed according to plans, and all liens and other claims paid, and a sinking fund created and main- tained sufficient to retire the loan as it matured. To prevent default in the terms of this bond certain of the sureties advanced money borrowed from banks on their personal in- dorsement, and thereafter brought this action in contribution against the other co-sureties. Bean, J. . " The agreement of the sureties is, in legal effect, to pay to the insurance company such dam- ages as it might sustain in case of a breach thereof by their principal. They did not obligate themselves to perform such conditions. That was u contract and duty of the principal alone, and the sureties were only liable to the obligee in case it failed to perform them Their li- ability was to the insurance com- pany alone, and there is neither al- legation nor proof that it ever made or had any claim for damages under the bond. But it is argued a breach of the bond and consequent damages to the insurance company would have occurred if certain of the sure- ties had not pledged their individual credit for money with which to com- plete the building The finance committee, composed princi- pally of sureties on the bond, seems to have volimtarily borrowed the money, and paid the obligations of the Chamber of Commerce upon their own responsibility, and without con- sulting the principal. But, assum- ing that, if they had not done so, there would have been a breach of the bond, it does not follow that the action of a, part of the sureties in borrowing money for the Chamber of Commerce to use in the construction of the building would bind a, non- participating surety. The borrowing sureties could determine for them- selves the necessity or desirability of doing so, but they had no authority to determine that question for Hughes, and bind him by their acts. There was no agreement between the sureties by or under which such au- thority was granted, nor anything in the bond authorizing one surety to act in this regard for another, or the majority for all. Each surety had a right to stand upon the letter of his contract, and, in case of a breach or threatened breach of the bond, to exercise his own judgment as to whether it was better for him to suffer default and answer in damages to the obligee in the bond, or to become liable on a new obliga- tion. His co-sureties could not de- termine that question for him. . . . . . There is no contractual relation between sureties enabling one to dis- charge a common obligation at his own pleasure and in his own way, and thereby bind the other. Now, in this ease, there was no breach of the bond, and no claim for damages thereunder was ever made by the insurance company. Had a claim matured on the bond in favor of the insurance company, and been paid by part of the sureties, they might, perhaps, compel contribution from the non-paying sureties with- out the recovery of a judgment for breach of the bond, by making it ap- pear that they had no means of pre- venting a judgment against them. But they could not voluntarily bor- 498 THE LAW OF SUEETTSHIP. quest of his co-obligor he may have contribution,"'' but if the agreement has been made between co-sureties to pay in certain proportion,", and thereafter one pays the whole, it is held that the one paying is not entitled to contribution/'^ Judgment against one surety is prima facie evidence of de- fault by the principal, as against the co-surety liable in con- tribution,^"* but not conclusive. ^°'' §276. Contribution as affected by the release of one of several co-sureties. If the creditor releases one co-promisor in suretyship the re- maining promisors may claim their discharge to the extent of the contributory share of the. one released.^"* But it is held that if the remaining surety pays the entire debt, waiving the discharge which he might claim by reason of the act of the cred- itor, that he may enforce contribution against the one releasfid by the creditor.^"' If a surety releases one of his co-sureties from his liability to contribute, the aliquot part of the surety released cannot be recovered from the remaining obligors, but in all other re- spects his right of contribution is unaffected.^'* The fact that the creditor failed to recover against one co- surety in a joint action against both sureties does not bar the surety who was compelled to pay from enforcing contribution from the one against whom the creditor failed to recover,^"" row money for their principal, and lee Ante Sec. 114. bind a nom-participating surety.'' is' Hill vs. Morse, 61 Me. 541 ; Fales vs. McDonald, 7'9 Atl. 969. Olapp vs. Rice', 15 Gray 557. But see Bottoms vs. Leonards, 21 iss Currier vs. Baker, 61 N. H. Ky. L. Rep. 862; 53 S. W. 273; 613; Murphy vs. Gage, 21 (S. W. Hotham vs. Berry, 82 Kan. 412; (Tex. Civ. App.) 396. 108 Pac. 801; Guckenheimer & iss Koelsch vs. Mixer, Admr., 5a Bros. Co. vs. Kann, 89 Atl. 807. 0. S. 207; 39 N". E. 417. This ease 162 Golsen vs. Brand, 75 111. 148. arose upon a bond of a treasurer. 1S3 Curtis vs. Parks, 55 Cal. 106. In a joint action against the sure- 184 Breckinridge vs. Taylor, 5 ties judgment was had against one Dana (Ky.) 110. but in favor of the other. The one 168 Kramph vs. Hatz, 52 Pa. 526 ; recovered against paid the judgment Cathcart vs. Foulke, L3 Mo. 561 ; and brought this action in contribu- Briggs vs. Boyd, 37 Vt. 534; Baib- tion against the other, cock vs. Carter, 117 Ala. 576; 213 South. 487. KIGHTS AND EEMBDIES. 499 Where one co-promisor is released as to the creditor by oper- ation of law, such as a discharge by the statute of limitations, if the remaining obligors are bound, and pay the debt, they may recover in contribution from the one against whom the creditor is barred.^'"' §277. Bankruptcy of a surety — Effect on co-surety's right of contribution. The ITational Bankruptcy Act of 1898 makes no direct pro- vision respecting the contingent liability of a co-surety for con- tribution. The general provision under which the liability may be classified if it is included at all, is that all debts are provable that are founded upon contracts " express or im- plied." The term " implied contract " is not defined in the act."^ The discharge of a co-surety in bankruptcy under this act Minshall, J. : " The mere fact that it was there determined that he was not liable on the bond to the obligee, cannot conclude the plaintiff in this action from demanding contribution from the estate of his deceased co- surety, if, as a matter of fact, they were co-sureties on the bond, and the plaintiff has been compelled to dis- charge all, or more than his just proportion, of the common liability. The subject matter of the two ac- tions is different. The former was a suit on a treasurer's bond by the obligee against the makers as co- defendants to recover for a breach of it. The present is a suit by one surety on the bond against the estate of another for contribution; and had not accrued at the time of the former suit. It is not based upon the bond It is not enough that an issue may have been joined between the obligee and the defend- ant, as to the liability of the latter on the bond. Whatever that issue may have been, it was not an issue between himself and his co-defend- ant, the plaintiff in this action, and could not therefore conclude the lat- ter; though parties to the suit they were not such in an adversary char- acter, being simply co-defendants to the suit on the bond." See also Hoxie vs. National Bank, 20 Tex. Civ. App. 462; 49 S. W. 637. Contra — ^Hood vs. Morgan, 47 W. Va. 817; 36 S. E. 911. 170 Cawthorne vs. Weisinger, 8 Ala. 714; Camp vs. Bostwick, 20 0. S. 337; Martin vs. Frantz, 127 Pa. 389; 18 Atl. 20; Aldrich vs. Aldrich, 56 Vt. 324; Faires vs. Cockerell, 88 Tex. 428; 31 S. W. 190, 639; Wil- liams vs. Ewing, 31 Ark. 229. See also Hill vs. Morse, 61 Me. 541. Oontro— Cochran vs. Walker, 82 Ky. 220. iTi National Bankruptcy Act of 1898, Sec. 63 (a) (4). 500 THE LAW OF SUEETYSHIP. raises a question of some difficulty where the payment by th« other surety is subsequent to the discharge. In such a case' it must be definitely determined, in order to dispose of the question, whether the liability to contribute arises upon an implied contract which dates from the making of the suretyship undertaking, or whether the obligation to cou' tribute is an equity which arises for the first time when the other surety pays.^'^ Under the first construction the right of contribution must be barred, under the second it would not be. The earlier bankruptcy acts of this country and the English acts, contain broader provisions for contingent debts than the act of 1898, and the uncertain liability of a surety to contribute to his co-surety was deemed a provable debt under those acts.'" It may be doubted whether a contingent liability to contrib- ute as a co-surety is provable as a debt against a bankrupt surety in cases where no payment is made by the other sUrety until after the discharge of the bankrupt. 172 The many and varying expres- vided for, the creditor may make sions of the courts in stating the claim therefor and have his claim nature of doctrine of contribution allowed, with the right to share in have been referred to in section 279. the dividends, if the contingency i"3 The act of 1841 contained a happens before the order for the provision which in general terms final dividend." described a liability such as is in- Under these acts it was held that curred by one co-surety to another, the contingent and uncertain claim before payment of the debt by either of a surety for contribution, depend- of them. It was provided that all ing first upon the contingency that persons " having uncertain or contin- the principal would make default, gent demands against such bankrupt and second that the other surety shall be permitted to come in and would pay, was a provable claim in prove such debts or claims, under bankruptcy, and although the surety this act, and shall have a right, did not pay until after the discharge when their Jebts and claims become of his co-surety, yet the claim for absolute, to have the same allowed contribution was barred, them." Act of Aug. 19, 1841, Sec. 5. Tobias vs. Rogers, 13 N. Y. 59 The act of 1867 covered the claim (Law of 1841). In this case the of co-sureties for contribution in plaintiff and defendant were sureties these terms, Sec. 5068, " In all cases upon a replevin bond, and several of contingent debts and contingent years after the execution of the bond liabilities contracted by the bank- the defendant was adjudged a bank- rupt, and not herein otherwise pro- rupt. Five years after the defendant BIGHTS AND REMEDIES. 501 §278. Contribution between parties to bills and notes. Accommodation indorsers are not entitled to contribution in the absence of special agreement to that effect. It may always be assumed that the later indorsers lend their name on the faith of the earlier indorsers as well as in reliance upon the maker. This assumption gives to the later party an advantage was discharged in bankruptcy the plaintiff was required to pay the penalty of the bond, and thereafter brought this suit for contribution, claiming the liability against the bankrupt to have arisen after his discharge. Gardiner, C. J. : " The effect of the discharge was to exonerate Rog- ers from his obligation incurred to the defendants in the replevin suit, by his execution of the bond in their favor, as one of the sureties of Ma- honey and Trull. His liability as co- obligor with the plaintiff was ex- tinguished by opera tien of law; and from that moment he ceased to be a co-surety with him for a common liability or a common principal. . . . . The defendants in the replevin suit could have released one of the sureties with the assent of the other, leaving the latter sole guarantor of the performance of the contract of the principal. What the parties could do by agreement the law has done without it. When the sureties contracted for their principal, they knew that the National Legislature could, in the case that has arisen, discharge either of them from the obligation thereby assumed, and that the right of contribution would cease with the liability to which it was antecedent. If the plaintiff is without remedy, it is by an act of the law to which he, in common with every other citizen, is presumed to have assented." See also Bberhardt vs. Wood, 2 Tenn. Ch. 488 (Law of 1867). In this case the default of the principal occurred before the bank- ruptcy, but the payment by the sure- ty was after the bankruptcy of the co-surety. It was held, " T)ie dis- charge was from the obligation as surety, and the inference is logical, that, afterwards, when the plaintiff paid the debt, there was no such relation between him and the defend- ant as would sustain a, claim for contribution, that claim resting sole- ly on the relation of co-suretyship. And so it has been held and on this very ground, Tobias vs. Rogers, 13 N. Y. 59. It is argued, however, that although this may be true as to the creditor, yet the plaintiff had no debt or claim against the defendant, as his co-surety, until he paid the decree of the 19th of Jan. 1874, and could not, therefore, prove against the estate of the bankrupt in 1871. But the obligation had become fixed as a debt before the petition in bank- 1 uptcy, and the extent of that liabil- ity was ascertainable, and the pro- portion of such liability which such surety might be compelled to pay was contingent upon the ability of the principal. Every surety has a demand against his principal which is contingent upon his being com- pelled to pay any part of the debt, and such demand is provable. Every joint debtor has a demand again^ his co-debtor, contingent upon his 502 THE LAW OF SUEETYSHIP. of which he cannot be deprived without his consent.^^'' It is, however, competent to show by parol that the several indorsers agreed to maintain the relatior of co-sureties.^^" Where one signs as surety a note signed by two persons, without knowing that one of the signers is in fact a surety of the maker, he cannot be held as co-surety of such other sure- ty- 175(Z It is not necessary to show an express contract for contribu- tion. It will be sufficient if the circumstances indicate an in- tention to become co-sureties. Thus where a maker of a note asked three others to sign for his accommodation; before mak- ing the note he made the request of ^aeh one separately and each promised to sign if the others did. Nothing • was said about the order in which they were to sign or in reference to being compelled to pay more than his share of the debt, and such de- mand is provable. It seems to fol- low logically that every surety has a demand against his co-surety, where the liability is fixed, contingent upon his being compelled to pay more than his share of the debt, and that demand is provable." Contra — Byers vs. Alcorn, 6 111. App. 39; Dunn vs. Sparks, 1 Ind. 397; Swa.m vs. Barfjer, 29' Vt. 282. The reasons upon which these cases rest are that a liability be- tween co-sureties does not exist as a matter of contract, but arises from a principle of equity growing out of the relation of the parties, and that it requires a payment to set on foot this equity, and that such claim does not attach contingently or otherwise till after payment by one co-surety of more than his share, and hence not being provable against the bankrupt, he is not discharged from it. The English Bankruptcy Act oi I8S3 provided, Sec. 37 (3) for a dis- charge from "all debts and liabil- ities present or future, certain or contingent, to which the debtor is subject at the date of the receiving order." This was construed to include a liability for contribution where the solvent surety was called upon to pay after the discharge in bank- ruptcy of his co-surety. Wolmershausen vs. Gullick, L. R., a Ch. Div. (189'3) 514. "One de- . fendant I have dismissed from the action on the ground that he is dis- charged by a composition under Sec. 1'8 of the Bankruptcy Act, 1SS3, in- asmuch as it appears to me that his liability to contribute, although not ascertained at the time of the bankruptcy proceedings, nor includ- ed in the schedule of liabilities or in, the claims or proofs, and not a debt in respect of which an adjudi- cation of bankruptcy could have been sustained, was a liability with- in the meaning of See. 37 of the Act, and therefore a debt provable in bankruptcy." 174 McDonald vs. MeGruder, 3 Pet. 470; McGurk vs. Huggett, 56 Mich. Ii87; 22 N. W. 308; Harrah vs. Doherty, 111 Mich. 175; 69 K W. 242; WiUis vs. Willis, 42 W. Va» 522; 26 S. E. 3V5; Harshman vs. Armstrong, 43 Ind. 126. 175 Easterly vs. Barber, 66 N. Y. 433; Preston vs. Goaild, 64 Iowa 44; 1'9 N. W. 83i4; Kiel vs. Choate, 92 Wis. 517; 67 N. W. 431; Smith vs. Morrill, 54 Me. 48; Harris vs. Jones, 23 N. D. 488; 136 K. W- 10«O; Wil- son vs. Hendee, 74 N. J. L. 640; 66 Atl. 414. n^ia Citizens N^ational Bank vs. Burcb, 14)5 N. C. 316; 50 S. E. 71.. EIGHTS AND REMEDIES. 503 an obligation of contribution. It was held that the order of signing was immaterial, and that these circumstances indicated a mutual understanding that each was a joint obligor with the others.'" By the provisions of the code in California, all indorsers whether regular or for accommodation are entitled to contribu- tion.'" §279. The right of indemnity against the principal. If the promisor in suretyship pays the debt of the principal in whole or in part, he is entitled to recover the amount paid from the debtor. If the principal makes no express promise to indemnify the one who engages to answer for his debt or de- fault, the law will imply a promise. The right of indemnity springs from the equity that one should not be permitted to shift his burdens upon another mere- ly because the accommodating party, having no special interest in the transaction, has neglected to protect himself by contract. In the case of the promisor's right of indemnity, the courts have not troubled themselves over the proposition that where there is no express contract the right springs wholly from equity, and that therefore there is the same reason for holding that an action for indemnity is cognizable only in equity, as was so often held in the matter of contribution between co- sureties.'^* From the time of the very earliest cases there has been a gen- eral acquiescence in the rule that a payment by a surety or guarantor for the account of their principal is presumed to be at the request of the latter, which raises an implied promise of reimbursement, upon which an action at law will lie.'^° ITS Hagerthy vs. Phillips, 83 Me. In Stirling vs. Forrester, 3 Bligh, 336; 22 Atl. 223. 590, Lord Eldon indicated that he See also Mulcare vs. Welch, 160 had formerly had some doubt wheth- Mass. 58; 35 N. E. 97. er the surety could enforce the right IT' California Civil Code, See. of indemnity by action at law as 1432; Bunker vs. Osborn, 132 Cal. upon implied contract. 480; 64 Pac. 853. if 9 Toussaint vs. Martinnant, 2 T. 1^8 Ante See. 260. R. 100; Wood vs. Leland, 1 Met. Fidelity & Deposit Co. vs. Buck- ley, 75 N. H. 50(6; 77 Ati 402. 504 THE LAW OF SURETYSHIP. A surety upon a bail bond, conditioned for the appearance of a person charged with crime, has no right of indemnity against the principal for moneys paid upon a forfeited recogni- sance, except upon an express contract for indemnity. The law will not imply a contract between parties so related. The distinction appears to be that payment by a surety of the pen- alty of a bail bond does not discharge the obligation of the prin- cipal to appear, and no benefit being conferred by the pay- ment, a contract for reimbursement will not be implied, also, that liability upon a bail bond arises from the neglect of the surety in permitting the escape of the principal, and the surety is, in a sense, a wrongdoer, and it would be against public policy for the law to imply a promise of indemnity.^*" 387; Konitzky vs. Meyer, 49 N. Y. o71 ; Clay vs. iSeverence, 55 Vt. 300; Katz vs. Moessinger, 110 111. 370; :.Iartin vs. Ellerbe's Admr., 70 Ala. 326; Smith vs. Sayward, 5 Me. 504; Lougliridge vs. Bowland, 52 Miss. 546; Cotton vs. Alexander, 32 Kan. 339; 4 Pac. 259; Hazleton vs. Valen- tine, 113 Mass. 472; Blake vs. Dow- ney, 51 Mo. 437; Hellams ts. Aber- orombie, 15 S. C. 110; Boyd vs. Brooks, 34 Beav. 7 ; Badeley vs. Con- solidated Bank, 34 Ch. Oiv. SStS; Cooper vs. Parker, 176 Ala. ISZ; 57 So. 472. If the principal makes an expresa contract of indemnity at the time the surety enters into the undertak- ing, the promise implied by law wiM be merged in the express agreement, and recovery will be limited to the terms of the latter. Roosevelt vs. Mark, 6 Johns. Ch. 266. But a special indemnity contract given by a stranger will not merge the contract implied by law. Wes- ley Church vs. Moore, 10 Pa. 2713. ISO Jones vs. Orchard, 16 C. B. 6|1|4. Chipps vs. Hartnoll, 4 B. & S. 414, Pollock, C. B.: "Here the bail was given in a criminal proceeding; and, where bail is given in such a pro- ceeding, there is no contract on the part of the person bailed to indem- nify the person whoi became bail for him. There is no debt, and with re- spect to the person who bails, there is hardly a duty." Contra — Reynolds vs. Harral, 2 Strob. (S. C.) 87. But though there is no such im- plied promise to sustain an action by the principal in the recognizance, and no subrogation in equity, the accused can make an express con- tract by bond, deed of trust, or oral promise to indemnify. United States vs. Ryder, 110 U. S. 729; Moloney vs. Nelson, 158 N. Y. 351; 53 N. E. 31 ; Carr vs. Davis, 64 W. Va. 522 ; 63 S. E. 326 ; 20 L. R. A. (N.S.) 58; iStevens vs. Hay, 61 111. 399; Leary vs. U. .S., 224 U. S. 567. Contra — Consol. Co. vs. Mus- grave, 1 IL. R. A. Ch. Div. 37 (1900). It is held that it is against public policy to accept a, bail bond in a criminal proceeding where there is a special contract of indemnity. United States vs. Simmons, 47 Fed. Rep. 575. See also Herman vs. Jeuchner, 15 Q. B. Div. 561, where it is held that a contract to indemnify against loss in becoming surety upon a bail bond is illegal. Brett, J.: "It is illegal, because it takes away the protection which the law affords for securing the good behavior of the plaintiff. When a man is ordered to find bail, and a surety becomes responsible for him, the surety is bound at his peril to EIGHTS AND REMEDIES. 505 Where the consideration for the suretyship contract is illegal, as where a public officer, in consideration that the surety wili sign his bond, agrees to deposit public funds in tlie bank of the surety, no promise of indemnity will be implied, and in- demnity can not be enforced/^^ The law will not imply a promise against all who may have been benefited by the payment of the surety, but only against the one whose debt has been discharged. Where one member of a firm gave bond to the United States for the payment of duties on imported goods, and the surety was compelled to pay, it was held that he could not recover against the other partners upon an implied promise of indem- nity, even though the importations were by lihe partnership, and the bond was given for the benefit of the firm.^'^ see that his principal obeys the order of the court; at least, this is the rule in the criminal law; but if money to the amount for which the surety is bound is deposited with him as indemnity against any loss which he may sustain by reason of his principal's conduct, the surety has no interest in taking care that the condition of the recognizance is performed." 181 Ramsay's Est. vs. Whitbeek, 183 111. 550; 56 N. E. 322, Cart- wright, G. J.. "When a. sureiy signs a bond the law raises an im- plied promise by the principal to re- imburse the surety for any losa which he may sustain, and when a loss occurs this implied contract of indemnity relates back and takes ef- fect from the time when the surely became responsible. Under this rule, when the sureties signed the bond of Ramsay the law implied a promise on his part to indemnify and save them harmless from all loss which they might sustain by reason of such signing, and when they made up the deficit this implied promise related back to the date of the bond. This implied promise was perfectly lawful and legal, and it is said that if there was a separate promise on the part of Ramsay to keep the money in the banks it would not prevent a recovery by the sureties upon the lawful prom- ise to reimburse them. This argu- ment loses sight entirely of the consideration upon which Ramsay's promise rested. . . . The law will not enforce the lawful implied prom- ise of indemnity resting upon the illegal consideration that the banks would borrow money and pay inter- est on it." Foreign corporation not licensed to do business in state of suit can not maintain action against surety company on liability bond against defalcation of employee. McCanna vs. Citizens' Trust & Surety Co. of Philadelphia, 76 Fed. 420. 182 Tom vs. Goodrich, 2 Johns. 213, Keni, C. J.: "There is no privity between the parties but what arises from the bond. It would be refining upon the doctrine of im- plied assumpsits, and going beyond every case, to consider the surety in a bond, as having, by that act, a remedy at law against other per- sons, for whom the principal in the bond may have acted as trustee." See also Moore vs. Stevens, 60 Miss. 809; Krafts vs. Creighton, 3 Rich. L. (S. C.) 273. 506 THE LAW OF SURETYSHIP. It is held that where one member of a partnership executes his individual obligation for the benefit of the firm, and repre-' sents to the surety that it is a firm debt, and requests him to sign on behalf of the firm, that the promisor thereby becomes a surety for the partnership, and a payment by the surety raises an -implied promise against all the members of the finn.^'' A surety for one of two or more joint obligors cannot recov- er indemnity from any except the particular debtor for whom he engaged, as where in a suit against several partners a bond is given by one partner, and the surety pays the judgment against all the partners, the implied promise of indemnity arises only as against one.^'* Promise of indemnity will, not be implied where the surety or guarantor is a mere volunteer, and signs without request of the principal/*" If a verbal promise of suretyship is made at the request of the principal and the promisor pays, he may recover indemnity, although payment could not have been enforced against him by the creditor, by reason of liie Statute of Frauds/*' 183 Purviance vs. Sutherland, 2 0. S. 478; McKee vs. Hamilton, 33 0. S. 7; Burns vs. Parish, 3 B. Mon. (Ky.) 8; Springs vs. McCoy, 122 N. C. 628; 29 S. E. 903; Garner vs. Hudgins, 46 Mo. 399. 184 Bowman vs. Blodgett, 2 Met. 308; Yoder vs. Briggs, 3 Bibb. (Ky.) 228 ; Osborn vs. Cunningham, 4 Dev. & Bat. Law (N. C.) 423. 185 Carter vs. Black, 4 Dev. & Bat. Law (N. C.) 425; Executors of White, 30 Vt. 336; McPherson vs. Meek, 30 Mo. 345. But see Teberg vs. S'wenson, 32 Kan. a2'4; 4 Pac. 83. C-cmtra — ^Hecker vs. Mahler, 64 O. 3. 398. 180 Beal vs. Brown, 13 Allen, 114. In this case the guarantor was debt- or of the principal, and when sued he pleaded set-off on account of money paid upon a verbal guaranty for the plaintiff, held — Bigelom, G. J. : " The Statute of Frauds can not avail the plaintiff, as an answer to the set-off. Although the verbal guaranty was within it, and might have been avoided if the defendant had seen fit to rely upon the statute when called on by the plaintiff's creditor for the payment of the debt, the defendant was not bound to set it up. He had a right to perform his parol undertaking. It was a con- tract made on a, good consideration, which the statute does not declare void or illegal, but only provides that no action shall be maintained upon it against the guarantor. But this enactment is exclusively for the benefit of the guarantor, and is de- signed to protect him from the dan- ger of being made liable for the debts of another by false testimony. He may elect to fulfill his verbal EIGHTS AND EEMEDIES. 507 §280. When right of indemnity arises. An implied contract to indemnify one who pays the debt of another arises at the time the suretyship is made. " Upon well settled principlesi, it is clear that the contract of a prin- cipal with his surety to indemnify him for any payment which the latter may pay to the creditor in consequence of the lia- bility assumed takes effect from the time when the surety be- comes responsible for the debt of the principal. It is then that the law raises the implied contract or promise of indem- nity. No new contract is faade when the money is paid by the surety, but the payment relates back to the time when the contract was entered into by which the liability to pay was in- curred. The payment only fixes the amount of damages for which the principal is liable under his original agreement to indemnify the surety." ^" The relation of debtor and creditor between the principal and his accommodation promisor dates from the inception of the suretyship contract without regard to the time when the prom- isor pays,^*' and a surety or guarantor in the prosecution of his right of indemnity may have a fraudulent conveyance set aside, made by the principal prior to the payment^** But a cause of action against the principal does not arise until the promisor makes payment.^*" It is not necessary to pay the entire debt ; an indemnity may promise, and, if he does so and pays Child vs. Powder Works, 44 N. H. money in pursuance thereof, the 354; Hook vs. Eicheson, lli5 111. ■ • 1 J I.J. • 1-1,1 s J.I, 431; 5 X. E. '98; Davis vs. Hoopes, principal debtor is liable for the ' . ,_1 X -^ t ^oi '• \ . -J 4. I,- 33 Miss. 173; GrifBn vs. Long, 13il amount as for money paid at nis ^ „. _„_ instance and request. The Statute 'issin re'stout, lOS Fed. Rep. 794. of Frauds can have no operation as i89 Lougliridge vs. Bowland, 52 between the original debtor and his Miss. 546; Hatfield vs. Merod, 82 guarantor." 111. 113; Bragg vs. Patterson, 85 IHT Bigelow, 0. /.. In Eice vs. Ala. 233; 4 South. 7W; Anderson vs. Southgate, 16 Gray 142; Poe vs. Walton, 35 Ga. 202; Smith vs. Dixon, 60 0. S. 124; 54 N. E. 86. Young, 173 Ala. 190; 5o 'So. 425. See also Martin vs. Ellerbe's Adm., But see Williams vs. Tipton, 5 70 Ala. 326; Harper vs. McVeigh, 82 Humph. (Tenn.) 66; Rice vs. Down- Va. 751; 1 a. E. 103: PolhiU vs. ing, 12 B. Mon. (Ky.) 44. Brown, 84 Ga. 338; 10 S. E. 921; i90 Stearns vs. Irwin, 62 Ind. Zollickoffer vs. Seth, 44 Md. 359'; ggg. -e^-^i]^ vs. Graf, lOil Wis. 217; 508 THE LAW OF SUEETTSHIP. be enforced upon part payment to the extent of the amount paid, and if the debt is paid by instalhnents, action may be brought for each installment as it is paid/°^ A cause of action for indemnity, in the absence of an ena- bling statute or express agreement, cannot arise before the ma- turity of the debt, although if payment is made by the surety or guarantor before maturity, it will constitute a ground for indemnity when" the debt becomes due, and action can then be brought as if the payment had been made at that time. ^'^ The common law rule as to the time when action for indem- nity may be brought has in part been superseded by statute in many of the states which provide for action before debt due whenever grounds exist for the provisional remedy of attach- ment."' §281. Equitable exoneration. A Court of Equity has jurisdiction to compel the principal to exonerate the surety or guarantor at the maturity of the 76 N. W. 1100; Minick VB. Huff, 41 vg. York CliflFs Improv. Co., 105 Neb. 516; S9' N. W. 7195; Nally vs. Me. 350; 74 Atl. 800. lAing, 5l6 Md. 567. But see Jones vs. Trimble, ® Rawle It is held that where a surety (Pa.) 381. holds as indemnity against his Sure- is>2 Tillotson vs. Rose, 11 Met. tyship liability the note of a third 299; Armstrong vs. Gilchrist, 2 person, that he may maintain ae- Johns. Gas. (N. Y.) 424; White vs, tioin upon such note as soon as the Miller, 47 Ind. 3185; Eoss vs. Mene- principal is in default, and need not fee, 123 Ind. 432 ; 25 N. E. 54'3 ; Gol- lirst pay the debt. Klein vs. Funk, sen vs. Brand, To 111. 148; Felton vs. 82 Minn. 3; 814 N". W. 4)60. Bissell, 25 Minn. 16; Barullard, 26 Vt. the owner in respect to such loss 295; Downer vs. Baxter, 30 Vt. 467; against any person or persons; Backus vs. Coyne, 45 Mich. 584; 8 hence a contractual relation existed N.' W. 694; Gross vs. Davis,* 87 between the defendant and the Tenn. 226; 11 S. W. 92. owner, and such owner and the as- 205 Apgar's Admr. vs. Hiller, 24 surance company could maintain an N. J. L. 812. action against the defendant which 206 Whitworth vs. Tilman, 40 made and installed the elevator, and Miss. 76 : Wynn vs. Brooke, 5 Rawle recover the amount paid by each (Pa.^ 106; Ctanmer vs. MdSwords, of them for damages on account of 26 W. Va. 417. EIGHTS AND REMEDIES. 513 amount he so discharges, he can, in the absence of an express contract, recover from his principal only the amount actually- paid by him. The implied contract in such ease is that the surety shall be indemnified only, and he will not be allowed to speculate out of his principal."^" If judgment is obtained against a surety and collected by execution upon his property, the principal cannot be charged with the costs upon the execution. It is the duty of the surety to pay the judgment, and the execution results from his own neglect.^"' No recovery can be had for damages resulting indirectly from the suretyship, such as inconvenience or loss in consequence of being obliged to sell property in order to raise money with which to pay the debt. Such disadvantages and possible losses are deemed waived by one assuming the liability.-"^ §284. Eight of indemnity as affected by the non-liability of the principal. A principal generally owes no duty of indemnity in those cases in which payment is made by the surety or guarantor upon claims for which the principal is not liable. But such rule will not be applied where the non-liability arises from causes which do not also afford a defense to the suretyship promisor.^^" If the principal is not liable, and in consequence of the same defects in the main contract the surety or guarantor might also mauitain a defense, or where the statute of limitations applies to both, a payment by the latter under such circumstances will be deemed voluntary, ^^'^ but if the defense is not available to the 207 Mathews vs. Hall, 21 W. Va. sought 1-ecovery in damages and it 510; amte, See. 299, and cases there was held — "The plaintiff did not, cited. upon the trial, show any contract or Contra — Walker vs. C. M. & N. promise of indemnity against trouble R. R. Co., 277 111. 451; 115 N. E. or harm. He showed nothing more 659. , than that he had become surety on 208 Pierce vs. Williams, 23 L. J. a note for th^ defendant, and that Ex. 322 ; Newcomb vs. Gibson, 127 having omitted to take it up when It Mass. 396; Van Petten vs. Richard- fell due, he had been sued and im- 9on, 68 Mo. 379; Beckley vs. Mun- prisoned. This fact alone did not son, 22 Conn. 299. entitle him to recovery." But see Kemp vs Finden, 12 M. & 210 Grieseke vs. Johnson, 115 Ind. W. 421; Van Winkle vs. Johnson, 11 308; 17 N. E. 573. iSee also Second Ore. 469 ; 5 Pac. 922. Nat. Bank vs. American Bonding 2«9 Vance vs. Lancaster, 3 Hay- Company, 931 0. S. 362; 113 N. E. wood (Tenn.) 130. 221. See also Hayden vs. Cabot, 17 211 Hatehett vs. Pegram, 21 La. Mass. 169. Ann. 722 ; HoUinsbee vs. Eitchey, 49 Powell vs. Smith, 8 Johns. 250. In Ind. 261. this case the surety was imprisoned Roe vs. Kiser, 62 Ark. 92 ; 34 S. for the debt of his principal and 514 THE LAW OF SUEBTYSHIP. promisor, his right of indemnity is not impaired by the non- liability of the principal. Thus where the principal is deceased, and the creditor fails to make claim against his estate until after expiration of the statutory time within which such claims are required to be pre- sented, and the debt against the estate is accordingly barred, under these circumstances, if the surety remains liable and pays the debt, he may recover indemnity from the estate. ^^^ Also where no claim is asserted by the holder of a note against- the maker, but judgment is obtained against the surety, who pays the judgment after the right of action by the holder against the maker, is barred by the statute of limitations, the surety may recover from the principal.^'^ It was held that where the claim against the surety was kept alive by special agreement for extension, but barred against the principal, the surety paying may recover indemnity."* W. 534. In this case the note of the principal was void on account of usury, and the surety paid with knowledge of the defense. It was held that he was not entitled to in- demnity. 212 Sibley vs. McAllister, 8 N. H. 389 ; Hooks vs. Branch Bank, 8 Ala. 680; Marshall vs. Hudson, Adm., 9 Yerg. (Tenn.) 57; Miller vs. Wood- ward, Adm., 8 Mo. 169 ; Braught vs. Griffith, 16 Iowa 26. 213 Godfrey vs. Eice, 59 Me. 308; Eeid vs. Flippen, 47 Ga. 273, Mc- Cay, J. : " The holder had the right to sue all or either of the parties to it, at his pleasure. He saw fit, before the statutory bar attached, to sue the securities only. This he had a right to do, by the very terms of the contract; nor has it ever been held that it is any wrong to the principal to fail to bring suit against him at the same time as suit is brought against the surety. .... Does the fact that, since tJ"* bringing of the suit, the statute oj limitations has barred a suit by the plaintiff against the principal de- stroy the right against the secu- rities? The foundation of all the rules discharging the surety for acts or neglect of the creditor is, that these acts have injured the surety. And if the neglect of the creditor to sue the principal until the statutory bar attaches so operat- ed as to injure the surety, I should hesitate to hold the surety bound. But in our opinion, the attaching of the statutory bar between the prin- cipal and the creditor does not in- jure the security. If he be still bound and has the debt to pay, the right to recover the money paid out of the principal still exists, notwith- standing the note, the obligation to the creditor, be barred." See also Walker, Adm., vs. Lath- rop, 6 Iowa 516; Bullock vs. Camp- bell, 9 Gill (Md.) 182. 21* Norton vs. Hall, 41 Vt. 471. BIGHTS AND EEMEDIES. 515 If the principal might have successfully defended against the debt on account of a failure of consideration, and the surety pays without request from the principal, without judgment being entered against him, he cannot recover indemnity from the principal.^^° Where the creditor releases the principal and recovers from the surety, the latter may recover from the principal."^® It is held that where the debt rests upon some illegal consider- ation, such as a note executed in settlement of a wager, that the surety paying cannot charge the principal by way of in- demnity since the principal himself is not liable on the note."^' Where the non-liability of the principal results from a want of capacity to make the contract the surety paying cannot en- force indemnity. " There is no doubt of the rule, that the principal is responsible to the surety for any liability incurred by the surety at the request of the principal. But that rule is subject to exceptions. A surety for an idiot, infant, feme covert, etc., may be liable when the principals are not liable either to the obligee or to him. So a surety for a corporation in a transaction where the corporation has not the power to con- tract, niay be liable when the corporation is not. And a corpo- ration may exceed its powers when there is no moral turpitude ; as a Board of County Commissioners contracting a debt to build a churchy a very praiseworthy object; but still, it is beyond their power; and they would not be bound while their surety would be." "' §285. Bight of indemnity as affected by the non-liability of the surety or guarantor. If a promisor in suretyship pays the debt when he might have avoided payment by asserting defenses sufficient for his "sgponhaur vs. Malloy, 21 Ind. (N. Y.) 396; 60 N. Y. S. 974; af- App. 287 ; 52 N. E. 245. If the sure- firmed 168 N. Y. 590; 60 N. E. ty pays without notice of the failure 1113. of consideration he may recover from 217 Harley vs. Stapleton's Adm., Ihe principal. 24 Mo. 248. Gasquet vs. Oakey, 19 La. 76. 218 Davis vs. Board of Commis- '16 Hyde vs. Miller. 45 App. Div. sioners of Stokes Co., 72 N. C. 441. 516 THE LAW OF SUEETTSHIP. exoneration, he may nevertheless recover his indemnity of the principal, if the creditor might in any manner have enforced the claim against the principal. One collaterally bound for the accommodation of another may frequently evade his liability for reasons which in no way affect the liability of the principal, and the waiver of such de- fenses does not change his attitude toward the principal debtor. This may be illustrated by the case of an accommodation iu- dorser who is entitled to demand and notice as a condition of his liability. If such conditions are not complied with, and he pays the note, he can nevertheless recover from the principal upon his implied contract of indemnity.^^' The same is also true where the statute of limitations has run against the surely but not the principal maker of a note.^^° Where a surety held a mortgage upon the land of the princi- pal as indemnity against his suretyship, and paid the debt when he might have defeated the claim by pleading the statute of 218 Stanley vs. McElrath, 86 Cal. 449; 25 Pac. 16. Contra — Sleigh vs. Sleigh, 5 Ex. 514, Parke, B.: "Now there is no doubt, that, if a person lends his name to another for his accommo- dation, the party accommodated un- dertakes to pay the bill at maturity, and further, to indemnify the person accommodating him, in ease that person is compelled to pay the bill for him; and this, no doubt, is an implied authority to such person to pay it, if he be in that situation that he may be compelled by law to pay the bill, though the holder do not actually compel him to do so; and after payment he may sue t\\,e party accommodated for money paid on his account; for such payment is, in truth, .under the implied authority given by the contract of accommo- dation between the parties; and whether this be a payment of the whole bill, or of only a part of it, makes no difference. But the de- fendant, as the person accommodat- ed, has not, we think, undertaken to indemnify the plaintiff against the consequences of any payment which the plaintiff may voluntarily make with knowledge of the circum- stances. Whether it is so in cases in which the legal obligation has been discharged by circumstances un- known to him, as for instance, by the creditor having given time to the principal debtor without his knowl- edge, it is unnecessary to determine ; but where a payment is made, as in this case, with the knowledge on the part of the plaintiff that he was not bound to pay, for the want of a notice of dishonor, to which he was unquestionably entitled, we think the payment is not made with the implied authority of the defendant." 220 McClatchie vs. Durham, 44 Mich. 435: 7 N. W. 76. EIGHTS AND REMEDIES. * 517 limitations, it was held that the surety could not enforce his mortgage security as against third parties asserting liens upon the property, as such lienors might maintain any defense to the debt that the surety could have interposed. ^^' §286. When judgment against the surety or guarantor is con- clusive as to the right to recover indemnity. If the surety is sued with the principal, or if when sued alone notice is given the principal, and the surety pays the judg- ment, such judgment is conclusive against the principal as a basis of recovery in an action for indemnity.^'''' It has been held that where the principal had no notice of the action against the surety, that a judgment by default against the surety entitles him to recover indemnity even though the principal had a complete defense, and by separate suit against him the creditor failed to recover. ^^' A judgment by default against the surety will generally be binding on the principal, except where the surety omits to make defense under circumstances that would charge him with negli- gence or bad faith. ^''* §287. Indemnity as affected by the bankruptcy of the principal. Under the National Bankruptcy Act of 1898 the discharge of the principal in bankruptcy does not discharge the surety,^^' and the liability to indemnify a surety or guarantor, is, by the terms of the act made a provable claim against the estate of the bankrupt. " Whenever a creditor whose claim against a bankrupt estate is secured by the individual undertaking of any 221 May vs. Ball, 21 Ky. L. Rep. 224 Doran vs. Davis, 43 Iowa 86. 1673; 56 S. W. 7. 225 National Bankruptcy Act, Sec. 222 Hare vs. Grant, 77 N. C. 203; 1« (a) : "The liability of a person Littleton vs. Richardson, 34 N. H. who is co-debtor with, or guarantor 179; Rice vs. Rice, 14 B. Mon. (Ky.) of or in any manner a surety for, a 335; Konitzky vs. Meyer, 49 N. Y. bankrupt shall not be altered by the 571. Prima facie only. Grommes discharge of such bankrupt." Witt- V8. St. Paul Trust Co., 147 111. 634.; haus vs. Zimmerman, 9 App. Div. 35 N. E. 820. (N. Y.) 202; 86 N. Y. iS. 315; U 223lStinson vs. Brennan, 1 Cheves N. Y. Ann. Cases 379; Goyer Co. 'Uw (S. C.) 15. vs. Jones,' 79 Miss. 253; 30 So. 651. 518 THE LAW OF SURETYSHIP. person, fails to prove such claim, such person may do so in the creditor's name."^^* The liability for indemnity being a provable debt against the bankrupt, the discharge therefore, bars the right of recovery except out of the assets of the estate, even though payment by the surety is not made till after the discharge. ^^' 226 Sec. 57 (i). The liability of a bankrupt as surety, guarantor, indorser, and the like, for another is provable, and is therefore barred by a discharge in bankruptcy if it existed when pro- ceedings in bankruptcy were begun. Hardy Buggy Co. vs. Paducah Bank- ing Co., 183 Ky. 776; 210 S. W. 452. Under the bankrupt act of 1898 a means is provided whereby a party secondarily liable may prove the claim against the primary debtor, if the creditor does not prove it. The claim of a surety against his principal, for a debt which the surety is obliged to pay after the discharge of his principal in bank- ruptcy, is therefore barred by such discharge. Hayer vs. Comstock, 115 Iowa 187; 88 N. W. 351. 22V Mace vs. Wells, 7 How. 272. This case arose under the bank- ruptcy act of 1841 in which provi- sion was made for proving the con- tingent claims of sureties. The language of the act was "iSiureties, indorsers, bail, or other persons hav- ing uncertain or contingent demands against such bankrupt, shall be per- mitted to come in and prove such debts or claims under this act." It was held that although the cause of action arose after the discharge in bankruptcy, it was nevertheless such a contingent demand as might have been proved against the estate, and was therefore barred. The surety may, too, prove in, bankruptcy his right of subroga- tion. The creditor of a bankrupt, who has received a merely voidable preference, and who has in good faith retained such preference until deprived thereof by the judgment of a court upon a suit of the trustee, can thereafter prove the debt so voidably preferred. Keppel vs. Tiffin Savings Bank, 197 U. S. 356. See also Liebke vs. Thomas, 116 U. S. 605; 6 S. Ct. 496; Lipscomb vs. Grace, 26 Ark. 231; Noland vs. Wayne, 31 La. Ann. 401; Hunt vs. Taylor, 108 Mass. 508; Crafts vs. Mott, 4 N. Y. 603. But see Thayer vs. Daniels, 110 Mass. 345. This case arose under the insolvency laws of the iState of Massachusetts, which made no pro- vision for proving a contingent li- ability against the estate of the in- solvent, and it was held that where payment was made by the surety after the discharge, the surety could recover indemnity from the princi- pal. Ante, iSec. 100, note 122. TABLE OF CASES. (References arc to sections.) A Abbott vs. Brown, ISl 111. 108, Sec. 117. vs. ■Williams, 19 Colo. ,512;, Sec. 205. AbeiH vs. Alexander, 45 Ind. 523, Sec. 83. Aberdeen vs. Honey, 8 Wash. 251, Sec. 135, 136. Acer vs. Hotohkisa, 97 N. Y. 395, Sec. 244, 254. Aoers vs. Curtis, 68 Tex. 423, Sec. 272. Ackerly vs. Parkiinson, 3 Maulfe & Seliwyn 411, Sec. 168. Acme Mfg. Co. vs. Reed, 197 Pa. St. 359, Sec. 66. Adam vs. Gomila, 37 I/a. Ann. 479, Sec. 208. Adams vs. Drake, 11 Cush. 504, Sec. 249. vs. Flanagan, 36 Vt. 400, Sec. 264. vs. Gilchrist, 63 Mo. App. 639, Sec. 188. vs. Hayes., 120 N. C. 383, Sec. 273. vs. Hugginsi, 73 Mo. App. 140, Sec. 9. vs. Jacoway, 34 Ark. 542, Sec. 206. vs'. Jones, 12 Pet. 207, Sec. 65. vs. OMve, 57 Ala. 249, Sec. 195. vs. Peoplie, 12i 111. App. 3S0, Sec. 230. vs. Thompson, IS Neb. 541, Sec. 191. Addison vs. Stia.te, 14 Tex. Crim. App. 568, Sec. 231. Adelberg vs. U. S. Fidelity & Guar. Co., 90 N. Y. Supp. 405, Sec. 239. Adler vs. State, 35 Ark. 5il7, Sec. 104, 232, 11a. Administrator vs. McKowen, 48 La. Ann. 251, Sec. 153. Advance Thresher Co. vs. Hogan, 74 0. S. 307, Sec. 118. Ady vs. Freeman, 90 Iowa 402, Sec. 197. Aetna Co. vs. Fowler, 108 Mich. 557, Sec. 107. vs.. Thompson, 68 N. H. 20, Sec. 244. Aetna Indemnity Co. vs. State, 101 Miss. 703, Sec. 224. vs. Watersi, I'lO Md. 673, Sec. 17. Aetna Insurance Co. vs. Wires', 28 Vt. 93, Sec. 251. Aetna Life Ins. Co. vs. Amer. Surety Co., 34 Fed. Rep. 291, Sec. 123, 129, 240. 'vs. Mabbett, 18 Wis. 677, Sec. 15, 100. vs. Middleport, 124 U. S. 534, Sec. 259. Aetna Nat. Bank vs. Winchesiter, 43 Conn. 391, Sec. 74. Agnew vs. Bell, 4 Watts (Pa.) 31, Sec. 262. Ahsmuhs vs. Bowyer, 39 Okla. 376, Sec. 146. Aiken vs. Leathers, 37 La. Ann. 482, Sec. 197. 519 520 TABLE OP CASES. (References are to sections.) Aitken Son & Co. va. Lang's Admr., 106 Ky. 632, Sec. 118. Alabama rns. Co. vs. Anderson, 67 Ala. 425., Sec. 255. Alabama Nat. Bank to. Hunt, 125 Ala. 512, Sec. 115. vs.. Rivers, 116 Ala. 1, Sec. 10. Alaska Salmon Co. vs. Standard Box Co., 158 Cal. 567, Sec. 45. Albany vs. McNamara, 117 N. Y. 168, Sec. 173. Alber vs. Froehlich, 30 0. S. 245, Sec. 185. Albers Commission Co. vs. Spencer, 230 Mo. 608', See. 197. Albright vs. Mills, 86 Ala. 324, Sec. 164. Alcatraz Masonic Assn. vs. U. S. Fidelity & Guaranty Co., 3 Cal. App. 338, See. 76-a. Alcoy Ry. vs. Greenliill, 41 London Solicitors Jour. 330, Seo. 117. Aldred's Estate, 229 Pa. 627, Stec. 8. Aldrich vs. Aldrich, 56 Vt. 324, iStec. 262, 276. vs. Ames, 9 Gray 76, Sec. 34. Aldricks vs. Higgins, 16 iSerg. & R. 212, Stec. 18, 60. Alexander vs. Byrd, 85 Va. 690, Sec. 114. vs. Hutchinson, 9 Ala. 825, Sec. 204. vs. Jacoby, 23 0. S. 358, Sec. 201. Alexander Lumber Co. vs. Aetna Co., 296 111. 500, Stec. 131. Alexiandria vs. Corse, 2 Cranch C. C. 363, See. 159. Alford vs. Baxter, 36 Vt. 158, Sec. 114. Aliger vs. Thacher, 19 Pick. 51, Sec. 138. Allegheny Valley R. Co. vs. Dickfey, 131 Pa. 86, Sec. 246. Allen vs. Berryhiil', 27 lovca 534, Sec. 104. vs. Brown, 5 Lans. (N. Y.) O'll, Sec. 197. vs. Commmonwealth, 90 Va. 356, Sec. 229. vs. DanielSion, 15 R. I. 480, Sec. 252. vs. Houlden, 6 Beav. 148., Sec. 105. vs.. Kellam, 94 Pa. 253, Sec. 183, 189. vs. Mamey, 65 Ind. 398, Sec. 74, 109, 127. vs. Morgan, 5 Humph. (Tenn.) 624, Sec. 11. vs. O'Donald, 23 Fed. Rep. 573, S«c. 98, 99. vs. Powell, 108 lU. 584, Sec. 249. vs. Ramey, 4 Strob. Law (S. C.) 30, Sec. 161. VBL Rightmere, 20 Johns 365, Sec. 67. ve. Rundte, 50 Conn. 9, Sec. 63. vs. Sharpe, 37 Ind. 67', See. 97. vs. State, 6 Blaxjkf. (Ind.) 262, Sec. 156. vsi. State, 61 Ind. 288, Sec. 158. vs. Thompson, 10 N. H. 32.^ Sec. 41. vs. Wood, 3 Ired. Eq. (N. C.) 386, Sec. 262. vs. Woodard, 125 Mass. 400, Sec. 118. Ailer vs. Aller, 40 N. J. L. 446, Sec. 122. Alliance Trust Co. vs. Stewart, 1'15 Mo. 236., Sec. 103, 197. Allies v&. Probyn., 2 Cromp. M. & R. 408, Sec. 93. Allison vs. Sutherlin, 50 Mo. 274, Sec. 244. Alsop vs. Price, 1 Doug. 160, Sec. 100. Amerioan Agricultural Chemical Co. vs. Ellsworth, 109 Me. 195, Seo. 66. TABUS OF C.VSEP. 521 (References are to sections.) American Bonding Co. vs. Morrow, SO Ark. 49', Sec. 233. va. Pueblo Investment Co., 150 Fed. 17, See. 17. vs. Reynolds, 203 Fed. 35&, S«c. 248. vs. Rudolph, &3 Col. 380, Sec. 100. American Bonding & Trust Co. vs. Milwaukee Harvester Co., 91 Md. 733, Sec. 129, 144. American Brewing Co. vs. Talbot, 125. Mo. 3S8, Sec. 181. American Building & Loan AsBm. vs. Wateen, 52 Minn. 23, Sec. 131*. American Credit Indemnity Co. vs. Casaard, 83 Md. 272, Sec. 52. American Exchange Bank vs. Seaverns, 12il IH'. App. 480, Sec. 66. Aineriean Exchange National Bank vs. Goubert, 210 N. Y. 421, Sec. 194. American Fidelity Co. vs. East Ohio Sewer Pipe Co., 101 N. E. 671, See. 261. American Tnvcstmenit Co. vsi Marquam, 62 Fed. Rep. SCO, Sec. 112. American Iron & Steel Mfg. Co. vs. BeaH, 101 Md. 423, Sec. 86, 94. American National Bank vs. Fidelity & Dep. Co., 58 S. E. 867, Sec. 248. American. Radiator Co. vs. American Bonding Co., 72 Neb. 100, Sec. 23-a. American Surety Co. vs. Boyie, 65 0. S. 486, Sec. 263. vs. Folk, 124 Tenn. 139, Sec. 233. vs. Gaskill, 85. Vt. 3i5», Sec. 153. vs. Koen, 49 Tex. Civ. App. 98, Sec. 16, 188. vs. Nelson, 77 Minn. 402, Sec. 236'. vs. Pacific Surety Co., 8T Conn. 258, Sec. 137. vs. Pauly, 170 U. S. 133, Sec. 106, 190, 233, 238, 242. VBi. Raeder, Assignee, 15 O. C. C. 47, Sec. 131. vs. San Antonio Loan & Trust Co., 98 S. W. 387, Sec. 76-a. vs. Scott, 18 Okl. 264, Sec. 76-a. V9. ShaUenberger, 183 Fed. 636, Sec. 13, 233'. vs'. Thurber, 121 N. Y. 665, Sec. 128. vs. Thurber, 162 N. Y. 244, Sec. 236. vs. United States, 127 Ala. 349, Sec. 243'. American Telegraph Co. vs. Lennig, ISfli Pa. 594, Sec. 132. Ames vs. Foster, 106 Mass. 400, Sec. 39. vs. Huse, 55 Mo. App. 422, Sec. 245. vs. Maclay, 14 Iowa 281, Sec. 103, 177. Amicable Mut. Life Ito. Co. vs'. Sedgwick, 110 Mass. 163, Sec. 76, 132. Amick vs. Woodworth", 58 0. S. 86, Sec. 244. Amis. vs. Bank of Kentucky, 8 La. Ann. 44'1, Sec. 196. Amherst Bank vs. Root, 2 Met. 522, Sec. 174. Ammons vs. Whitehead, 3'1 Miss. 99, Sec. 186. Amory vs. Francis, 16 Mass. 309, Sec. 252. Aniaheim Co! vs'. Parker, 101 Cal. 483, Sec. 106. Anderson, vs. Andersion, 55 Mo. App. 268, Sec. 197. vs. Bellenger, 87 Ala. 334, Sec. 2, 20, 74, 133. vs. Blakely, 2 Watts & Serg. (Penn.) 237, Sec. 5&. vs. Brown, » 0. 151, Sec. 147. vs. Hayman, 1 H. Bl. 120, Sec. 36. vs. Meeker Co. Commrs., 46 Minn. 237, Sec. 181. 522 TABLE OP CASES. (References are to sections.^ Anderson vs. Mannon, 7 B. Mon. (Ky.) 217. See. 83. vs. Rhea, 7 Ala. 104, Sec. 181. vs. Southern Ry. Co., 9 Ga. App. 199, Sec. 22. vs. Soward, 40 0. S. 32S, Sec. la. vs. Spence, 72 Ind. 315', Sec. 34. v®. Walton, 35 Ga. 202, Sec. 280. Andrews vs. Estes, 11 Me. 267i, Sec. 142. vs>. Pope, 126 N. C. 472, Sec. 67. VB. Smith, 2 C. M. & R. 627, Sec. 40. vs. Varrell', 46 N. H. 17, Sec. 117. Annett vs. Terry, 35 N. Y. 256, Sec. 221. Anselin vs. Groby, 62 Mo. App. 421, Sec. 182. Anthony vs. Capell, 58 Misis.. 350, Sec. 102. Antisdel vs. Williamson, 165 N. Y. 372, Sec. 79, 81. Apgar's Admr. vs.. HiHer, 24 N. J. L. SI 2, Sec. 267, 283. Appolinaris Co. vs. Venable, 136 N. Y. 46, Sec. 193. Applewhite vs. Shaw, 4 Humph. (Tenn.) 93, See. 251. Arhogast vs. Hays', 98 Ind. 26, Sec. 260. Ardesco Oil Co. vs. No. Amer. Oil Co., 66 Pa. 375, Sec. 114. Argusi Co. vs. Mayor of Albany, 55 N. Y. 495, Sec. 28. Armitiage vs. Pulver, 37 N. Y. 494, Sec. 263. Armstrong vs. GMchris.t,' 2 Johns. Casi. (N. Y.) 424, Sec. 280. Anidd TS. Arnold, 124 Al'a. 550, Sec. 218. vs. Bryant, 8 Busih. (Ky.) 668, Sec. 8, 10. vs. Green, 116 N. Y. 566, See. 244. Amot vs. Erie Ry. Co., 67 N. Y. 316, See. 11. Arnot's Admr. vs. Symonds', 85' Pa. St. 99, Sec. 8. Asevado vs. Orr, 100 Cal. 293, Sec. 192. Ash vs. Abdy, 3 Swanst. 664, Sec. 25. Ashford vs'. Robinson, 8 Ired. Law 114, Sec. 27, 66. Ashley vs. Brasil, 1 Ark. 144, See. 182. Ashmore vs. Evans, 11 N. J. Eq. 151'; Sec. 46. Asmussen vs. Post Ptg. & Pub. Co., 143 P. 396, Sec. 66. Assets Realization Co. vs. American Bonding Co., 88 0. S. 216, Sec. 263i. Assignment of Richart, In re, 58 111. App. 91, Sec. 2123. Attanta National Bank vs. Dougla&s, 51 Ga. 205, Sec. 73. Atlantic Trust & Deposit Co. vs. Union Trust & Title Corp., 110 Va. 2i Sec. 15,- 812, 105. Atlantic & Pacific Teleg. Co. vs. Barnes, 64 N. Y. 385, Sec. 107. Atlas Bank vs'. Brownell', 9 E. I. 16S, Sec. 107. Atlas Lumber Co. vs'. Flint, 20 S. D. 118', Sec. 36. Atlas Shoe Co. vs. Bloom, 209 Mass. 563, Sec. .57. Att'y Gen., In re, 14 Fla. 277, Sec. 150. Atwood vs. Lester, 20 R. L 660, See. 6. Auoh'ampaugh va. Schmidt, 70 la. 642, Sec. O.'J, 113. Augusta vs. Sweeney, 44 Ga. 463, Sec. 145. Aulltman vs. Hefner. 67 Tex. 54, Sec. 117. TO. Smith, 52 Mo. App. 351, Sec. 11«. TABLE OF CASES. 523 (References are to sections.) Aultman & Taylor Co. va. Gorham, 87 Mieli. 233, Sec. 16. Austin vs. Curtis, 31 Vt. 64/, Sec. 86. vs. Dorwin, 21 Vt. 38, Sec. 93. vs. Gibson, 28 Up. Can. (C. P.) 954, Sec. 92. VB. Richardson, 1 Gratt. 310, Sec. 20. vs. Raiford, OS Ga. 201, Sec. 222. vs. Vrooman, 128 N. Y. 229, Sec. 1168. AverilT vs. Louks, 6 Barb. 470, Sec. 23. Avery vs. Rowell, 50 Wis. 82, Sec. 11. Ayers vs. Dixon, 78 N. Y. 318, Sec. 23', 251. / vs. Duggan, 57 Neb. 750, Sec. 187. vs. Harness, 1' 0. 366, Sec. 109. vs. Toland, 7 Har. & John. (Md.) 3, Sec. 142. B Baber vsL Hanie, 163 N. C. 588, Sec. 253, 274. Babcock, In re, 3 Story, 303, Sec. 115. Babcock vsi Carter, 117 Ala-. 575, Sec. 275. vs. Meek, 45 Iowa 137, Sec. 46. Babbit vsv Finn, 101 U. S. 7, Sec. 187, 189. Bacon vs. Burnham, 37 N. Y. 614, Sec. 8. Backus -i^. Coyne, 45 Mich. 584, Sec. 269, 271, 283. Baehelder vs. Fiske, 17 Mass. 464, Se6. 262, 273. Badger vs. Barnabee, 17 N. H. 120, Sec. 9. Badeley vs. Consolidated Bank, 34 Ch. Div. 536, Sec. 179. Baer's Appeal, 127 Pa. 360, Sec. 217. Baglin vs. Southern Surety Co., 41 App. D. C. 530, Sec. 236, 239. vs. Title Guaranty & Surety Co., 166 Fed. 356, Sec. 15. Bagot vs. State, 38 Ind. 263, Sec. 174. Bagott vs. Mullen, 32 Ind. 332i Sec. 267. Bagwell vs. Amer. Surety Co., 102 Mo. App. 707, Sec. 76-a. Baiky vs. Butterflel'd, 14 Me. 112, Sec. 175. VB>. Croft, 4 Taunt. 611, Sec 16. vs. Dennis, 135 Mo. App. 93. vs. Farmers Nat. Bank, 97 111. App. 66, Sec. 11. vs. Griffith, 40 Up. Can. (Q. B.) 418, Siec. 90. vs. New, 29 Ga. 214, Sec. 115. vs. Rosenthal, 56 Mo. 385, iSec. 186. vs. Sweeting, 9 C. B. N. S. 843, Ktec. 28. Bain vs. Whitehaven, 3 H. L. Cases, 1, Sfec. 47. Bainbridge vs. Wade, 16 Q. B. 89, See. 26, 50. Baker vs. Briggs, 8 Pick. 123, Sec. US: vs. Bryan, 64 la. 561, >See. 131. vs. Belvin, 122 N. C. 190, Sec. 180. vs. Kennett, 54 Mo. 82, Sec. 104. vs. Merriam, 97 Ind. 539, Sec. 103. vs. Moor, 63 Me. 443, iSec. 218. vs. Peterson, 300 111. 526, Sec. 143. vs. Robinson, 63 N. C. 191, IStec. 8, 10. 524 TABLE OP CASES. (References are to sectiens.) Baker vs. Rand, 13 Barb. (N. Y.) ]62, Sec. 59-. vs. Shoelian, 2» Minn. 235, Sec. 172. ■vs. Trotter, 73 Ala. 277, Sec. 58. Baker City vs. Murphy, 30 Oreg. 406-, Sec. 153. Baker County v&. Huntington, 46 Oreg. 275, Sec. 23-a, 109-, 123. Baldwin vs. Daly, 41 Wash. 416, Sec. 113. vsi. Fleming, 90 Ind. 177, Sec. 264, 265. vs. Walker, 94 Ala. 514, Sec. 200. Baldwin Coal Co. vs. Davis, 62 Pac. Rep. (Col.) 1041, Sec. 40. Ba)Ich vs. Hooper, 32 Minn. 15S', Sec. 220. Balfour vs. Crace, 2 Cli. 733, Sec. 71. Balfew vs. Roler, 124 Ind. 557, Sec. 24&. BalloW V3'. Wichita Co., 74 Tex. 339> Sec. 109. BaU vs. Gardner, 21 Wend. 270, See. 207. Ballantine vs. Yung Wing, 146 Fed. 621, See. 20, 47. Baltimore First Nat. Bank vs. Gerke, 68_Md. 449', Sec. 132. Baltimore & Ohio R. R. Co. vs. Bitner, 15 W. Va. 455, See. 117. vs. Gaulter, 60 III. App. 647, See. 163. vs. Jackson, 3 Atl'. Rep. (Pa.) 100, Sec. 130. vs. V'onderwerker, 19 W. Va. 2i66v Sec. 181, vs. Walker, 45 0. S. 577, Sec. 251. Bank vb'. Anderson, 65' la. 692, Sec. 106. vs. Booze, 75 Mo. App. 189, Sec. 101. VB. Buchanan, 87 Tenn. 32, Sec. 97. vs. CresBon, 12 Serg. & R. (Pa.) 306, Sec. 146. VS. Danckmeyer, 70 Mo. App. 168, Sec. 97. vs. Gaylord, 34 Iowa 246, Sec. 68. vs. Hall, 107 Pa. 583, Sec. 214. vs'. Haskelli, 91 N. H. 116, Sec. 113. vs. Haug, 82 Mich. 607, Sec. 252. vs. Jeffs, 15 Wasli. 230, Sec. 101. vs. Johnson, 9 Ala. 622, Sec. 94. vs. Martin, 81 Kas. 794, Sec. 213. vs. Patterson, 78 Ky. 291, Sec. 252. vs. Peltz, 176 Fla.. 513., Sec. 101. vs. Railway Co., 65 Iowa 692, Sec. 15. vs. Richmond, 235 Mo. 532, Sec. 105-11. vs. Sharp, 152 Ala. 589', iSee. 7. vs. iSSmpson, 90 N. C. 467, Stec. 100. vs. S'inclair, 60 N. H. 100, Sec. 67. vs. Walter, 104 Tenn. 11, Sec. 83. vs. Whitman, 66 111. 331, Sec. 94. Bank of Australasia vs. Reynell,- 10 New Zealand, L. R. 257, Stec. 108. Bank of Biddeford vs. McKenney, 67 Me. 272, Sec. 92. Bank of Carrolton vs. ILatting, 37 Okla. 8, Sec. 16. Bank of California vs. Union Packing Co., 60 Wash. 456, Stec. 66. Bank of Genessee vs. Patchin Bank, 13 N. Y. 312, iSec. 148. Bank of Limestone vs. Penick, 2 T. B. Mon. (Ky.) 98, Sec. 75. Bank of Missouri vs. Matson, 26 Mo. 243, Sec. 90. TABLE OE CASES. 525 (References are to sections.) Bank of Monroe vs. Gifford, 79 Iowa 300., Sec. 98, 193, 1^9?. Bamk of New Zealand vs'. Wilson, 5 N. Z. L. R. S. C. 215, Sec, 77. Bank of N(!wbe.rry vs. StegalT, 4i Miss. 142, Sec. 138. Bank ot Tarboro vs. Fidelity & Deposit Co., 128 N. C. 366, See. \T 23?*, 288', 240. Bank Cases, 92 Tenn. 437, Sec. 252. Banks vs. Speers, 103, Ala. 436', Sec. 223. vs. State, 02 Md. 88, Sec. 95. Bankers Surety Co. vs. Linder, 137 N. W. 496, Sec. 249. vs. Security Trust Co., 39 App. D. C. 364, Sec. 187. Barr vs. Mitchell, 7 Oreg. 347, Sec. 8. Barclay vs. Gooch, 2 Esp. 571, Sec. 2S2. Barker vs.. C. P. & St. L. Ky. Co., 2143 III. 482, See. 170. vs. Parker, 1 Dum. & E. 287, Sec. 52. vs. Scudder, 56 Mo. 272, Sec. 42. vs. Wheeler, 60 Neb. 470, Sec. 176. Barnard vs. LlOyd, 85i Cal. 131, See. 45. Bamea vs. Barrow, 61 N. Y. 39, Sec. 2. vs. Century Savings. Bank, 149 Iowa 367, Sec. 15, 106. vs. Gushing, 168 N. Y. 542, Sec. 55. vs. Mowry, 129 Ind. 568, Sec. 115'. vs. Reed, 84 Fed. Rep. 603, Sec. 65. vs. Siammons, 128 Ind. 5-96:, Sec. 116. va State, 36 Tex. 332, Sec. 230. vs. Whitaker, 45 Wis. 204, Sec. 164. Barnett vs. Barnett, 83 Va. 504, Sec. 128. vs. Smith, 17 111'. 565', Sec. 52. Barrett-Hicks Co. vs. Glas, 9 Oal. App. 491, Sec. 76.-a. Barney vs. Forbes, 118 N. Y. 580, See. 16, 27, 57. vs. Saunders, 16 How. 536, Sec. 100. Barrows vs. Lane, 5 Vt. 161, Sec. 20. Bsirtlett & KHng v9. Illinois Surety Co., 142 Iowa 538', Sec. 76-a. Bartlett vs. Wheeler, 195 IE. 445, Sec. 125-. Bartram vg. Ohio & Big Sandy R. R. Co., 141 Ky. 100, Sec. 197. Barton vs. Brent, S7 Va. 3S5, Sec. 245. vs. Croydon, 63 N. H. 417, Sec. 255. vs. Ridgeway, 92 Va. 162, Sec. 106. vs. Thompson, 66 Iowa 526, Sec. 207. Barela va. Tootlie, 66 Pae. Rep. (Goto.) 899, Sec. 182, 189. Biu-bcr vs. EdeMn', 9 Ky. L. Rep. 971, Sec. 197. vs. Gillson, W Nev. 89, Sec. 280. Bartholomew vs'. Firsit National Bank, 57 Kan. 594, Sec. 245. Bardwell'vs. Lydall, 7 Bing. 4S9, Sec. 2S2. Earth vs. Graf, lO'l Wisi 27, See. 280. Barge vs. Van Der Horek, 57' Minn. 497, See. 274. Barrington vs. Bank of Washington, 14 Serg. & R. 405., Sec. 130. Barry vs. Ransom, 12 N. Y. 462, Sec. 265. Barton vs. Matthews, 141 Ark. 262, iScc. 245. vs. Title Guaranty & Surety Co., 192 Mo. App. 561, See. 233. Bashford vs. 'Shaw, 4 0. S. 263, Sec. 68. 526 TABLE OF CASKS. ^References are to sections.) Baskin vs. Huntington, 130 N. Y. 313, Sec. 69, 119. Basliiaim vs. Gommonwealith, 7'6 Ivy. 36, Sec. 122. Bash vs. Howald, 27 Okl. 462, Sec. 208. Bassett vs. Fidellity Co., 184 Mass. 310, Sec. 218. vs. O'Neil' Coal Co., 140 ICy. 34C, See. 16. vs. Perkins, 119 N. Y. S. Z9i, See. 51. Bastow vs. Bennett, 3 Camp. 220, Sec. 50, 59. Bateman vs'. Butler, 124- Ind. 223i, Sec. 42. Bateman Bros. vs. MapeT, 145 Cal. 241, Sec. 76-b. Battel! vs. Majtot, 58 Vt. 271, Sec. 46. Bat«son vs. Gosling, L. R., 7 C. P. 9, Sec. l^. Bates vs.. KilQdan, 17 S. C. 563, See. 202. Bates, In re, 118 lU. 524, Sec. 262. Batard vs'. Hawes, 2 El. & El. 287, See. 2i62. Bathgate vs. Haskin, 59 N. Y. 533, Sec. 258. Baubien vs. Stomey, 1 Speers Eq. (S. C.) 508, Sec. 101. Baugher vs. Duphorn, 9 Gffl (Md.) 314, Sec. 118. Baucus VS'. Barr, 45 Hun 582, Sec. 2il8. Bausman, vs. Credit Guaramtee Co., 47 Minn. 377, Sec. 282. Bauschard vs.. Fidelity & Casualty Co., 21 Pa. Sup. Ct. Rep. 370, See. 79, 93i Baxter vs. Ralston, In re, 18 N. B. 407, Sec. 252. Bay Co. vs. Brock, 44 Mich. 45, See. 148'. Beard vs. Converse, 84 111. 515, Sec. 25. vs. Union Co., 71 AHa. 60, Sec. 117. Beardsley vs. Hawes, 71 Conn. 30, Sec. 6, 62. Beaird vs. Russ, 32 La. Ann. 304, See. 181. Beakley vs. Cunningham, 1165 S. W. 269, Sec. 226. Bean vs. Parker, 17 Mass. 5S1, Sec. 149. vs. Valile, 2 Mo. 126, Sec. 27. Beaman vs. Russe-liL, 20 Vt. 205,, Sec. 31. Beach vs'. Zimmerman, 106 Ind. 495, Sec. 84. Beat VB. Brown, 13 Allen, 114, Sec. 26, 279. Bealli vs. New Mexico, 16 Wall'. 535, Sec. 1S7. vs. Walker, 26 W. Va. 741, Sec. 244. Beasley vs. State, 53 Ark. 57, Sec. 2:30. Bearden vs. State, 89 Ala.. 21, Sec. 231. Beaver vs. Slanker, 94 ffl. ITS', Sec. 244, 250. vs. Beaver, 23 Pa. Ifi7, Sec. 281. Beauc^haine vs. McKinnon, 55 Minn. 3118, See. 176. Becker vs. Keokuk Watea: Worlcs, 79 Ta,. 419, Sec 131. vs. Krank, 77 N. Y. S. 665., See. 43. vs. People, 164 IM. 267, Sec. 189. Beckham vs'. Drake, 2 H. L. 5T9, Sec. 135', 142. Bockley vs. Munson, 22 Conn. 2aO, Sec. 283. Beckwith vs. Talfbot, 95 U. S. 280', Sec. 29. vs. Webber, 78 Mich. 290, Sec. ^1. Becovitz vs. Saperstein, 46 Ind. App. 339', Sec. 215. Bechervaisc vs. Lewis^ L. R., 7 C. P. 372, Sec. 268. tabijE op cases. 527 fReferences are to sections.) Bsdford vs. Kelley, 173 Mich. 492, Sec. l>, 83. Bedwell vs. Gephart, 07 la. 44, Sec. 9S. Beebe vs. Dudley, 26 N. H. 240, Sec. CS. vs. Moore, 3 McLean, 387, See. 9. vs. Robinson, 52 Ala. 66, Sec. 146. Beeson vs. Howard, 44 Ind. 413', Sec. 126. Beers vs. Shannon, 73 N. Y. 292, Sec. 137. vs. Wolf, 116 Mo. 179, Sec. 76-a. Belden v». Hurlbub, 94 Wis. 562, Sec. 23-a, 109, 127. Belloni vs. Freeborn, 63 ISf. Y. 383, Sec. 17, 50, 74, 12S. BeM vs. Bruen, 1 How. 160, Sec. 49. vs. Jaisiper, 2 Tred. Eq. (N. C.) 597, Sec. 263. VB'. Norwood, 7 La. 95, Sec. 53. vs. Paul, 35 Keb. 210, Sec. 131. vs. People, 94 III. 230, Sec. 222. vs. Rudolph, 70 Miss. 284, Sec. 224. vs. Walker, 54 Neb. 222, Sec. 187. vs. Western River Imp. Co., CO Ky. 5u8, Sec. 206. Betoomt Min. & Mil. Co. vs. Costigan, 21 Col. 465, Sec. 197. Bellinger vs. Thompson, 26 Oreg. 320, Sec. 218. Belleville Savings Bamk vs. Bornman, 124 111. 200, Sec. 20. Bellevue Loiain & Hl'dg. Assn. vs. Jeekel, 104 Ky. 159, Sec. 106. BeiBows vs. LoveW, 5 Pick. 307, Sec. 116. Bemis vs. SpaWing, 9 Ky. L. Rep. 764, Sec. 197. Bent vs. Bent, 43 Vt. 42i, Sec. 209. vs. Cobb, 9 Gray 397, Sec. 22. Benton vs. Fletcher, 31 Vt. 4'18i Sec. 63. vs. Gibson, V Hill Law (S. C.) 56, Sec. 61. vsi. Wiltard, 17 N. H. 593, Sec. S. Benton County Sav. Bank vs. Boddicker, 117 Iowa 407, Sec. 23-a, 106. Benge's Admr. vs. Eversole, 1.5i6 Ky. 131, Sec. 115. Bennett vs. Brown, 20 N. Y. 99, Sec. 207. vs'. Carey, 72' Iowa 476, Sec. 15. vs. Cook, 46 N. Y. 268, Sec. 2161. vs. Draper, 139 N. Y. 260-, Sec. 50. vs. Southern Bank, 61 Mo. App. 297, Sec. 205. vs. State, 58 Miss. 556, Sec. 156.' vs. Whitney, 94 N. Y. 302, Sec. 172. Bensinger vs. Wren, 100 Pa. 500, Sec. 76, 80. Benjamin vs. HiMard, 23 How. 149, Sec. 81. Benham vs. Assurance Co., 7 Welsb. H. & G. 744, Sec. 110, Benedict vs. Olison, 37 Minn. 431, Sec. 115. Bentley vs. Dorcas, 11 0. S. 3l98i, Sec. 181. Benne vs. Schnecko, 100 Mo. 250, Sec. 247, 249. Berkey Co. vs. Sylvania Co., 97 0. S. 73, iStec. 193. Berlin Nat. Bank vs. Guay, 76 N. H. 216, Sec. 98. Berman vs. Elm Loan & Sav. Co., 114 Md. 191, Sec. 96. Berton vs. Anderson, 56 Ark. 470, See. 91. Berryman vs. Manker, 56 Iowa 150, Sec. 75. Berry vs. Pullen, 69 Me. 101, iSlec. 82, 83. 528 TABLE OF C.VSES. (References are to sections.) Berryhill vs. Keilmeyer, 33 Iowa 20, Sec. 188. Berghoff vs. Heckwolf, 20 Mo. STl, Sec. 212. Bergen VB'. Stewart, 28 How. Pr. 6, Sec. 2G3. Berridge vs. Berridge, 44 Ch. Kv. 168, Sec. 274. Best Brewing Co. vs. Klassen, 185 111. 37, Sec. 11, 182. Besshears vs. Rowe, 46 Mo. 501, Sec. 42. Bethune vs. Dozier, 10 Ga. 239, Sec. 20, 73. Betts vs. Mougin, 15 La. Ann. 52, Sec. 193. BevilJe vs. Boyd, 16 Tex. Civ. App. 491, Sec. 248. Bezzell vs: White, 13 Ala. 422, Sec. 274. Bick vs. Long, 15' Ind. App. 503, Sec. 202. Bicknell vs. Henry, 69 Wash. 408, Sec. 43. Biddinger vs. Pratt, 50 O. S. 710, Sec. 212. Bierce vs. Waterhouse, 219 U. S. 320, Sec. 213., 214. Bierma vs. Collumbia Typewriter Mfg. Co., 179 III. App. 69, Set. 211i Bigelow vs. Bridge, 8i Mass. 275, Sec. 153. vs. Coraegys', 5 O. S. 256, Sec. 15. vs. Stearns, 19 Johns. 3®, Sec. 168. vs. Stilphen, 36 Vt. 501, Sec. 74. Bigony vs. Tyson, 75 Pa. Ii57, Sec. 185. Bill vs. Bament, 9 M. & W. 3i6, Sec. 28. Billings vs. Sprague, 49 M. 509^ Sec. 244. Billingslea vs. Ward, 33 Md. 48, Sec. 46. Binford vs. Adams, 104 Ind. 41, Sec. 2,'59. vs. Grimes., 26 Ind. App. 481, Sec. 197. Bingham vs. Mears, 4 No. -Da. 437, Sec. I'lS, 187. Birdsall vs. Hejacock, 32 0. S. 177, Sec. 18, .50, 59 Birchell vs. Neaster, 36 0. S. .331, Sec. 40, 4«. Bird vs. Munroe, 66 Me. 337, Sec. 47. Birckhead vs. Brown, 5 Hill' (N. Y.) 635, See. 51. Bishop vs. Church, 2 Ves.. lOO, Sec. 69, 119. vs. Day, 13 Vt. 81, Sec. 115, 28J. vs. Eaton, 161 Mass. 489, Sec. 66. vs. Freeman, 42 Mich. 533, Sec. 17. Bissig vs. Britton, 59 Mo. 204, Sec. 34. Bissell vs. Saxton, 66 N. Y. 55, Sec. 174. Bittiok vs. Wilkins, 7 Heisk. (Tenn.) 307', See. 248. Bivins vs. He.lsJley, 4 Met. (Ky.) 78, Sec. 111. Bjoin vs. Anglim, 97 Minn. 527, Sec. 122. Black vs. Albery, 89 0. Si. 240, Stec. 52. vs. Kaiser, 91 Ky. 422, .Stec. 224. vs. Oblender, 135 Pa. 526, Sec. 156. Black Masonry & Cont. Co. vs. Nat'l Surety Co., 61 Wash. 471, Sec. 76-a, 76-b. Black, Starr & Frost vs. Grabow, 216 Mass. 516, Sec. 66. Black River Bank vs. Page, 44 N. Y. 453, iSec. 116. Blackett vs Crissop, 1 Lord Raym. 278, Sfec. 139. Blackburn vs. Crowder, 108 Ind. 238, Slec. 215. TABLE OP CASES. 529 (References are to sections.; Blake vs. Col«, 22 Pick. 97, Sec. 265. vs. Downey, 51 Mo. 437, See. 279. ve. Traders Xa.t. Bank, 145 Mass. 1», See. 248, 261. Bl'akeney vs. Walk & Co., 45 Tex. Civ. App. 635, Sec. 39. Blades vs. Dewey, 130 N. C. 17'6, Sec. 129. Blanding vs. Shepard, 101 App. Div. (N. Y.) 442, Sec. 63. Blanvelt vs. Kemon, 196 Pa. 128, Sec. 76-a. Bl'akely's Trustee vs. Bogard, 143 Ky. 377, Sec. 200. Blatchford vs. Millikin, 35 111. 434, Sec. 8. Blair vs. Perpetual Ihsuranee Co., 10 Mo. 55&, Sec. 80, 174. vs. Reid, 20 Tex. 310, Sec. 93. vs. Reading, 103 111, 375, Sec. 186. vs. Sanborn, 82 Tex. 686, Sec. 186. Bknkman vs. Vallejo, 16 Cal. 638, Sec. 12a. Blanchard vs. Brown, 42 Mich. 46, Sec. 203. vs. Blanchard, 201 N. Y. 134, Sec. 249. Bland vs. Creiager, la B. Mon. (Ky.) 509, Sec. 209. Bless vs. Jenkinsi 129 Mo. 647, Sec. 46. Blevins vs. State, 31 Ark. 53; Sec. 228. Blount vs. Hawkins, 19 Ala. 100, Sec. 41. Bloomington Min. Co. vs. Searles, 63 N. J. L. 47, Sec. 77. Bltock vs. Blum, 33 III. App. 643, Sec. 182. Blume vs. Bowman, 2 Ired. (N. C.) 338, Sec. 12/7. Blydenhurgh vs. Bingham, 38 N. Y. 37I>, Sec. 98. Board of Commissioners vs. Branham, 57 Fed. Rep. 179, Sec. 79. vs. Gray, ©1 Minn. 242, Sec. 151. Board of Education! vs. Fudge, 4 Ga. App. 637, Sec. 18. vs. Jewelli, 44 Minn. 427, See. 166. vs. National Surety Co., 18S Mo. 1G6, Sec. 1'37. vs. Quick, 99 N. Y. 139, Sec. 152. vs. Robinson, 81 Minn. 305', Sec. 23-a, 166. vs. Thompson, 33 0. S. 321, Sec. 16. vs. U. S. Fidelity & Guar. Co., 155 Mo. App. 109; Sec. 17. Board of School Directors vs. Brown, 39 La. Ansa.. 383, Sec. V4S<. Board of Supervisors' vs. Clark, 92 N. Y. 391, Sec. 152. VB. Ehlers, 45 Wis. 2S1, Sec. 164. vs. Pabsit, 70 Wis'. 352, Sec. 154. Boals vs. Nixon, 2i6 111. App. SYI, Sec. 48. Boalt vs. Brawn, 13 0. S. 364', Sec. 72. Boaler vs. Mayor, 19 C. B. N. S. 76; Sec. 92. Boatmen's Bank vs. Johnson, 24 Mo. App. 316, See. 102. Boardraan vs. Larrabee, 51 Conn^ 39, Sec. 82. Boaz vs. Milliken, 4 Ky. L. Rep. 700, Sec. 189. Boatwrig'ht vs. Stewart, 37 Ark. 614, Sec. 203, 208. Bobbott vs. Shryer, 70 Ind. 513, Sec. 26 Bockenstead vs. Perkins, 73 Iowa 23, Sec. 156, 224. Bocard ve. State, 79 Ind. 270, Sec. 160. Boehne vs. Murphy, 46 Mo. 57, Sec. 59. 530 TABLE OF CASES. (References are to sections.) Bohannon vs. Combs, 12 B. Mon. (Ky.) 363, Sec. 246. Boi.%e City v&. Randall, 66 Pac. 938, Sec. 20.5. Bole vs. Bogardis, 86 Pa. 37, Sec. 114. Boley vs. Lake St. Eltevated R. R. Co., 64 111. App. 306, Sec. 1B5. BoMes vs. Bird, 12' Colo. App. 78, Sec. 187. Boiling vs. Tate, 65 Ala. 417, Sec. 197. Bolitz's Estate, 133 Pa. 77, Sec. 248, 249. Bond vs. Farwell Co., 172 Fed. 58., See. 60, 6S. vs. Armstrong, 88 Ind. 65, See. 96. Bone vs. Smith, 164 S. W. 922, Sec. 43. Bonney vs. Seely, 2 Wend. 481, Sec. 282. Booth vs. Irving Nat. Ex. Bank, Ll^ Md. 668, Sec. 49, 6il, 67, «&. vs. Powers, 56 K. Y. 2a, Sec. 74. VB. Storrs-, et a1., 75 111. 438, Sec. 15, 105. Boothbay vs. Giles, 68 Me. 160, Sec. 146 Boone vs. Jones, 54 Iowa 699, Sec. 21, 148, 174. vs. State, 61 Ind. 370, Sec. 148. Boom vs. St. Paull', etc., 33 Minn. 2S8, See. 218. Boppart vs. Surety Co., 140 Mo. App. 675, Sec. 76-a, 233. Borden vs. Houston, 2 Tex. 594, Sec. 19. Boston Duck Co. vs. Dewey, 6 Gray 446, Sec. 46. Boston & Sandwich Gliass Co. vs. Moore, lift Mass. 435', Sec. 60. Bosman vs. Akeiley, 30' Mich. 710, Sec. 63. Bostwick vs. Van Voorhis, 9'! N. Y. 353; Sea 15, 71^ IW. Boswell vs. Colt[uitt, 73 Ga. 63, Sec. 232. Bott vs. Barr, 95' Ind. 243, Sec. 40. Bottfield vs. Gordon, 190 Mass. 567, Sec. 91. Bottoms vs. Leonards, 21 Ky. L. Rep. 862, Sec. 275. Boultbee vs. Stubbs, 16 Ves. 20, Sec. 92. Boulden vs. Estey, 92 Ala. 182, Sec. 188'. Bourne vs. Stevenson, 58 Me. 499, Sec. 217. Boulware vs. Hartsook, S3 Va. 679, Sec. 284. Boutin vs. Etsell, MO Wis. 276', Sec. 269, 271. Bowmaker vs. Moore, 7 Brioe 223, Sec. 81. Bower vs. Jones, 12S N. W. 470, Sec. 16. Bowden vs. Derby, 97 Me. 536', Sec. 170. Bowers vs. Beck, 2 Nev. 139, Sec. 202. V3. Fleming, 67 Md. 541, Sec. 163. Bowker vs. Bull, 1 Sim. (N. S.) 29, Sec. 250. Bowen vs. Hoskins, 45' Miss. 183, Sec. 270. Bowman vs. DIodgett, 2 Met. 308, Sec. 279. Boyd Tobacco Warehouse Co. vs. TerriU', K Ky. 468, Sec. 46. Boyd vs. Bell, 69 Tex. 735-, Sec. 119. vs. Brooks, 34 Beav. 7, Sec. 279. vs. Parker, 43 Md. IBS, Sec. 255. vs. Snyder, 49 Md. 325, Sec. 66. Hoyden vs. United States, 13 Wall. 17, Sec 167. Boyoe vs. Murphy, 91 Ind. 1, Sec. 37. Boylston Bottling Co. vs. O'Neill, 231 Mass. 498, Sec. 138. TABLE OF CASES. 531 (References are to sections.) Bardley vs. Burwell, 3 Denio (N. Y.) 61, Sec. 282^ 275. vs. Fisher, 1» Wallace 335', Sec. ICS. vs. Maim, 37 Mich. 1, Sec. 74. vs. Eichardson, 23 Vt. 720, Sec. 44. Bradley Eng. & Mfg. Co. vs. Heyburn, 5« Wash. C28, Sec. 8, 91-a. Braddock vs. Wertheimer, 68 Ark. 423, Sec. 67. Bradford vs. McCormick, 7a la. 129, Sec. 141. Braimum Lumber Co. vs. Pickaird, 33 Irad. App. 484, Sec. 7'3. Brandup vs. Brazier, 111 Miim. 376, Sec. 76-a. Bradford vsi. Waitson, 65 Fla. 4^61, Sec. 218. Bradshaw vs. Barber, 12oi Minn. 479, Sec. 50. Bragg vs. Patterson, 85 Ala. 233, Sec. 24&, 280. vs. Shain, 49 Cal. 131, Sec. 79. Brajit vs. Bameitt, 10 Tnd. App. 653, Sec. 16. Bray vs. Parcher, 80 Wis'. IB, Sec. 41. Brady vs. Reynolds, 13 Cal. 32, Sec. 69. Brackett vs. Rich, 23' Minn,. 485,, Sec. 63. Bradbury vs. Morgan, 1 Hurl. & Colt. 249, Sec. 71. Brand vs. Johnrowe, 60 Mich. 2ilO, Sec. 133. Brainard vs. Jones, 18 N. Y. 35,, Sec. 137, 214. Bradbume vs. Botfield, 14 M. & W. 550, Sec. 143. Brayton vs. Town, 12 Iowa 346, Sec. 170. Braithwaite vs. Jordiam, 5 N. D. 196, Sec. 181. Braiden vs'. Mercer, 44 0. S. 330, Sec. 226. Brandon vs. Brandon, 3 De G. & .J. 524, Sec. 244. Brauu vs. Crew, 183 Cal. 728, Sec. 90. Braught vs. Griffith, 16 Iowa 26, Sec. 248, 249, 284. Brandenburg vs. Flynn, 12 B. Mon. (Ky.) 397, iStec. 254, 263. Bramble vs. Ward, 40 0. ',Sl. 267, Sec. 94. Bree vs. Holbech, 2 Doug. 665, Sec. 141. Breed vs. Hillhouse, 7 Conn. 523, Sec. 16, 57, 67. vs. Weed, 130 Wis. 264, Sec. 188. Brent vs. Green, 6 Leigh (Va.) 16, .Sec. 22. Brewstei^ vs. Balch, 41 N. Y. S-uper. Ct. 63, iStec. 217. Brewer vs. Horst Lachmund Co., 127 Cal. 643, Sec. 30. Breokett vs. Addyman, 9 Q. B. Div. 783, Sec. 71. Brengle vs. Bushey, 40 Md. 141, Stec. 86. Breen vs. Kelley, 45 Minn. 352, Sec. 131. Brennan vs. Clark, 29 Neb. 385, ,Sec. 135. Breckinridge vs. Taylor, 5 Dana (Ky.) 110, Sec. 275. Briggs vs. Boyd, 37 Vt. 534, Sec. 275. vs. Downing & !Mathews, 48 Iowa 550, Sec. 9. vs. Latham, 36 Kans. 205, Stec. 16. vs. Manning, 80 Ark. 304, iS*c. 221. vs. McDonald, 166 Mass. 37, Sec. 144. vs. Norria, 67 Mich. 325, See. 94. va. Partridge, 64 N. Y. 367, Sec. 160. Bright vs. Carpenter, 9 0. 139, Sec. 9, 10. vs. Lennon, 83 N. C. 183, Sec. 263, 271, 275. vs. McKnight, 1 iSneed (Tenn.) 158, Stc. 18, 50, 66. 532 TABLE OF CASES. (References are to sections.) Breitung va. Lindauer, 37 Mich. 217, Sec. 85. Brigham vs. Carlisle, 78 Ala. 243, Sec. 46. BriUion Lumber Co. vs. Barnard, 131 Wis. 284, Sec. 106, 12!t. Bridges vs. Blake, 106 Ind. 332, iSec. 95. Bristol Milling & Mfg. Co. vs. Probasco, 64 Ind. 406, Sec. !>7. Brick vs. Freehold Nat. Bank, 37 N. J. Law 307, Sec. 99. Brighton Bank vs. iStaiith, 94 Mass. 243, Sec. 137. Brite vs. State, 24 Tex. 219, iSec. 229. Brinson vs. Thomas, 2 Jones Eq. (N. C.) 414, Sec. 248. Bridgman vs. Johnson, 44 Mich. 491, Sec. 251. Brice vs. Watkins, 30 La. Ann. 21, Sec. 259. Brisendine vs. Martin, 1 Ired. Law (N. C.) 286, Sec. 269. Bridgeport Malleable Iron Co. vs. Iowa Cutlery Co., 130 Iowa 736, Sec. 50. Brogan vs. National Surety Co., 246 U. S. 257, 'Sec. 131. Brown vs. Ayer, 24 Ga. 288, Sec. 102. vs. Bradford, 30 Ga. 927, Stec. 103, 177. vs. Bradlee, 156 Mass. 28, See. 161. vs. Baldwin, 121 Mo. 126, Stec. 197. vs. Bank, 79 N. C. 244, iSfec. 252. vs. Curtiss, 2 N. Y. 225, iSlec. 42, 61, 67. vs. Conner, 32 N. C. 75, Sec. 185. vs. Davenport, 76 Ga. 799, See. 108. vs. First Nat. Bank, 112 Fed. 901, Sec. 96. vs. Houck, 41 Hun 16, iStee. 248. vs. Johnson, 127 Ala. 292, iSee. 75. va. Kirk, 20 Mo. App. 524, Sec. 23, 251. va. Kinsey, 81 N. C. 245, Sec. 126. va. ILattimore, 17 Cal. 93, See. 153. vs. Melloon, 170 Iowa 49, Sec. 183. vs. Mo. Pac. Ry. Co., 85 Mo. 123, Sec. 191. vs. Phipps, 14 Miss. 51, Sec. 161. va. Eathburn, 10 Ore. 158, ISec. 98. va. Eay, 18 N. H. 102, Sec. 274. vs. Eouae, 125 Cal. 645, Sec. 248. vs. Eussell, 166 Masa. 14, -Sec. 145. vs. Shelby, 4 Ind. App. 477, Sec. 93. vs. ISpiegel, 156 Mich. 138, Sec. 67. vs. State, 78 Ind. 239, See. 160. vs. Title Guaranty & S'urety Co., 232 Pa. 337, Sec. 233, 238. vs. Vermont Mutual Fire Ina. Co., 83 Vt. 161, Sec. 102. vs. Weaver, 76 Miss. 7, iSec. 164, 170. Brown Carriage Co. vs. Dowd, 155 N. C. 307, Stec. 98. Browne va. Carr, 2 Russ. 600, Sec. 100. Brownell vs. Winnie, 29 N. Y. 400, See. 75. Bromberg va. Fidelity & Dep. Co., 139 Ala. 338, Sec. 108. Browning, et al., vs. Merritt, et al., 61 Ind. 425, Sec. 10, 112. Brockway va. Petted, 79 Mich. 620, Qec. 19. Brodie vs. St. Paul, 1 Ves. Jr. 326, Sec. 29. Brooking vs. Bank, 83 Ky. 431, Sec. 113. Brooks va. Allen, 62 Ind. 401, See. 74. vs. Baker, 9 Daly (N. Y. C. P.) 398, Sec. 5o. vs. Mangan, 86 Mich. 576, iStec. 168. TABLE OF CASES. 533 (References are to sections.) Brokavf vs. Kelteey, 20 M. 304, Sec. 5T. Broome vs. The Unit-ed States, 15 How. 143, Sec. 71, 119. Broad vs. Paris, 66 Tex. WO, Sec. 154. Broadway Nat. Bank vs. Baker, 176 Mass. 204, Sec. 11. •Brounty vs. Daniels, 23 Neb. 162, See. 182. Brougli's Estate, 71 Pa. 460, See. 245. Bruce vs. Bickerton, 18 W. Va. 342, See. 273. vs. U. S., 17 How. 437, Sec. 156. Brumby vs. Barnard, 60 Ga. 202., Sec. 201. Bruniback vs. German Bank, 46 Neb. 540, Sec. 109. Brubaker vs. Okeson, SG Pa. 519, Sec. 113. Brunswick vs. Snow, 73 Me. 177. Sec. 172. Bryan vs. Berry, G Cal. 394, Sec. 22. vs. CattelT, 15 Ila. 538, Sec. 145. vs. United States, 90 Fed. Rep. 473, Sec. 170. Bryant vs. American Bonding Co., 77 0. S. 90, Sec. 233. vs. Crosby, 36 Me. 562, Sec. 103. vs. Kinyon, 127 Mich. ISS', Sec. 122. vs. Rich, 104 Mich. 124, Sec. 42. Buckingham vs. Murray, 7 Houst. 176, Sec. 66. Bucki & Son Lumber Co. vs. Fidelity & Deposit Co., 109 Fed. Rep. 39a, Sec. 208. Bucktey vs. Van Diver, 70 Miss. 622, Sec. 208. Buekner vs. Stewart, 34 Alia. 539, Sec. 209. Buckmastcr vs. Grundy, 8 111. 62i6,*Sec. 271. Buchanan vs'. Milligan, 12S Tad. 332., Sec. 185. vs. Meisser, 105 111. 638, Sec. 266. Buffalo Cement Co. vs. McNaughton, 90 Hun 74, Sec. 131. Buffalo Press Club vs. Greene, 86 Hun 20, Sec. 138. Buffendeau vs. Brooks, 28 Gal'. 641, Sec. 139. Bugbee vs. Kendricken., 130 Mass. 437, Sec. 36. Euhrer vs. Bialdwin, 137 Mich. 263, Sec. 65, 66. Building Assn. vs.. Cummings, 45 0. S. G64, Sec. 20, 121', laa. Bull vs. Allen, 19 Co^nn. 101, See. 115. vs. Coe, 77 Call 54, Sec. 95, 102. BuU'ard vs. Johns, 50 Ala. 382, See. 30. Bullock vs. Campbell, 9 Gill (Md.) 182, Sec. 380, 284. Bulfeer, In re, 4S Cal. 558, Sec. r4/5. BuUoiva vs. Orgo, 57 N. J. Eq. 428, Sec. 44. BuBwinkle vs. Guttenburg; 17 Wis. 583, Sec. 163. Bulkeiey vs. House, 62 Conn. 459, Sec. 264. Bulkley vs. Stephens., 2S 0. S. 620, Sec. 184. Bulmer vs. Jenkins, 3 How. Pr. H, Sec. 210. Bunneman vs. Wagner, 16 Ore. 433, Sec. 41. Bunting vs. Gad'es, 77 N. C. 283, Sec. 145. Bunn vs. Jetmo.re, 70 Mo. 228, Sec. 149. vs. Lindsay, 95 Mo. 250, Sec. 259. Bunker vs. Osbom, 132»Cal'. 480, Sec. 278. 534 TABLE OF CASES. (References are to sections.) Bunce vs. Bunce, 65 Ta. 106, Sec. 224. Burson vs. Andes & Wife, 88 Va. 445, See. 17. Burden vs. Knight, 82 la. 584, Sec. 45. Burt vs. Wilson, 2S Cal. 632, Sec. 48. Burgoyne vs. Ohio Life Ins. & Trust Co., 5 0. S. 586:, gee. 68-, 119. Burke vs. Ciruger, 8 Tex. 66, Sec. 86. vs. Lee, 59 Ga. 1'66, Sec. 247. Burkle vs. Luce, 1 N. Y. 163, Sec. 212. Burnhisel vs. Firman, 22 Wall'. 170, Sec. 97. Burr vs. Boyer, a Neb. 265^ Sec. 99, 257. Burtan vs. Anderson, 5 Har. (DeJi.) 22il, 232. vs. Hansford, 10 W. Va. 470, Sec. 10. Burgess vs. Badger, 124 111: 288, Sec. 128. vs. Doble, 1419 Mlass'. 2S6, Sec. 188. Burchfield vs. HafFey, 34 Kan. 42', Sec. 137. Burnet vs. Courts, 5 Har. & John. (Md.) 78, Sec. 140. Burnett vs. Millsa/psi 59 Miss. 333, Sec. 263, 267. vs'. Stark, 136 N. W. 670, Sec. 197. vs. State, 18 Tex. App. 288, Sec. 229. Bums vs. Fidelity & Deposit Co., 96 Mo. App. 467, Seo. 7'6-a. vs. Folansibe«, 20 III. App. 41, Sec. 143. T». Parish, 3 B. Mon. (Ky.) 8, Sec. 279. Burr vs. Beckler, 264 111. 230, Sec. 11. Burrus vs. Cook, 93 S. W. 888, Sec. 249. Burroughs vs. Lott, 19 Cal. 125, iSlec* 272. Bushnell vs. Bishop Hill Colony, 28 111. 204, Sec. 58. vs. Bushnell, 77 Wis. 435, Sec. 262, 269. Bustemente vs. Stewart, 55 Cal. 115, iStec. 197. Bush vs. Kirkbride, 131 Ala. 405, Stec. 197. Busch vs. Fisher, 89 Mich. 192, Sec. 215. Bushong vs. Taylor, 82 Mo. 660, Stec. 261. Butctier vs. iSltuart, 11 M. & W. 857, Stec. 38. Butler vs. Bennetts, 51 Mont. 27, Stec. 163. vs. United States, 21 Wall. 272, iSee. 127. vs. Wadley, 15 Ihd. 502, Sec. 182, 190. Buttlar vs. Davis, 52 Tex. 74, Sec. 182. Byers vs. Alcorn, 6 111. App. 39, Sec. 277. vs. Hickman Grain Co., 112 lovpa 451, iSec. 54, 78. vs. State, 20 Ind. 47, iSec. 146. Byrne vs. Gardner, 33 La. Ann. 6, Sec. 208. vs. Hidden, 4 La. Ann. 3, Sec. 182. c Cady vs. Shepard, 12 Wis. 639, iStec. 10. Cadwell vs. Colgate, 7 Barb. 253, Sec. 199. vs. Jans, 1 Mont. 570, Sec. 215. Caffery vs. Dudgeon, 38 Ind. 512, Sec. 211. Cahill Iron Works, vs. Pemberton, 62 N. Y. S. 944, Seo. 57. Cahuzac vs. S'amini, 29 Ala. 288, Stec. 66. TABLE OF CASES. 535 (References are to sections.) Cahall vs. Citizens Mut. Bldg. Assn., 74 Ala. 539, Sec. 1S8. Cain vs. Harden, 1 Ore. 360, Sec. 181. vs. State, 55 Ala. 170, Sec. 232. vs. V'ogt, 138 Iowa 631, Sec. 98. Cairnes vs. Knight, 17 0. S. 68, Sec. 135. Calilbieath vs. Coyne, 4& Col. 199', Sec. ISO. Calvert vs. Londo-n Dock Co., 2 Keen. 639, Sec. 76-lj, 79. Calvo vs. Da vies, 73 N. Y. 211, Sec. 23, 90. Calloway vs. Snapp, 7S Ky. 561, Sec. 100. Callender vs. Olcott, 1 Mich. 344, Sec. 147. Calkins vs. Chandler, 36 Mich. 320, Sec. 40. Calhoun vs. Hannan, 87 Ala. 277, Sec. 203. vs. Littaie, lOe Ga. 336, Sec. 1-68. Callahan vs. SaJeski, 29 Ark. 210, Sec. 187. California Savings Bank vs. Amer. Sur. Co., 87 Fed. Rep. 118, Sec. 241'. Calvert vs. Gordon, 3 Man. & Ry. 124, Sec. 119. Camp vs. Bostwick, 20 O. S. 337, Sec. 269, 276. vs. Simmons, 62 Ga. 73, Sec. 8, 10. Campbell vs. American Bonding Co., 172 ALa. 458, Sec. 218; vs. Baker, 46 Pa. 243, Sec. 61 , 67. vs. Carroll, 35- Mo. App. 640, Sec. 192. vs. Chamberlain, 10 Iowa 337, Sec. 208. vs. Findley, 3 Humph. 330, Sec. 27. vs. Gates, 17 Ind. 126, Sec. 112. vs. Johnson, 41 0. S. 588, Sec. 16, 216'. vs. People, 154 HI. 596-, Sec. KK vs. RothweWi, 47 L. J. C. L. 144, Sec. 98. vs. Rotering, 42 Minn. 155, Sec. 141. Carapbelt Ptg. l>ress Co. vs. Powell, 78 Tex. 53, Sec. HI. Camden vs. Doremus', 3 How. 515, Sec. 63. V.S. McKoy, 4 llil;. 437, Sec. 10. Cambridge Sav. Bank vs. Hyde, 131 Mass. 77, Sec. 73, 79. Cambria Iron Co. vs'. Keynes, 56 0. S. 501, Sec. 59. Cameiron' vs. Burger, 60 Ore. 4ffS, Sec. 23il. VS'. Hajas Bros. Packing Co., 3 Ala. App. 520, Sec. 3<). CanfieH vs. City of Erie, 21 Mich. 160, Sec. IfiH. Cantril vs. Babcock, li Colo. 14», Sec. 213. Cape Girardeau Bell Tel. Co. vs. Hamil's Estate, 134 S. W. 1103, Sec. 2S9. Caperton vs. Gray, 4 Yerg. (Tenn.) 563, Sec. 30. Capeihart vs. Mhoon, 5 Jones' Eq. (N. C.) 178, Sec. 259. Cape! vs. Butler, 2 Sim. & Stu. 457, Sec. 99, 257. Capen vs. Bartltett, 153 Mass. 346, Sec. 2'1'5. Carr vs. Askew, 94 N. C. 101, Sec. 224. vs. Davis, 64 W. Va. 522, Sec. 279. vs. Meade, 77 Vn,. 1.12, Sec. 176. vs. Smith, 129 N. C. 232, Sec: 264. vs. Sutton, 70 W. Va. 4il'7, Sec. 232. 536 TABLE OP CASES. (References are to sections.) Carter vs. Black, 4 Dev. & Bait. Law (If. C.) 42S, Sec. a7». vs. Fidelity & Deposit Co., 134 Ala. 369, Sec. 146. ys. Mulrein, 8-2 Cal. 167, Sec. 194. vs. Thorn, 18 E. Mon. (Ky.)^ 613, Sec. 137. vs. Tioe, 120 Il'l. 277, Sec. 225. vs. Young, 77 Tenn. 210, Sec. 2:i6'. vs. Zenblin, 68 Ind. 436, Sec. 40, 4®. Carpenter vs. Broost, 2 Sandf. 537, Sec. 69. vs. Bowen, 42 Miss. 28, Sec. 258. vs. Davis, 72 III. 14, Sec. 46. vs. Kelly, 9 0. 106, Sec. 253. vs. King, 9 Met. 511, Sec. 1T3. vs. Longan, 16 Wall. 271', Sec. 51. vs. Minter, 72 Tex. 370, Sec. 248. vs. Oaks, 10 Rich. L. 17, Sec. 10. vs. Turrelil, 100 Mass. 450, 452, Sec. 202'. Carroll vs. Bowie, 7 Gill. (Md.) 34, See. 140. vs. McGee, 2& IST. C. 13, Sec. 1S4, 189. vs. Partridge, IK Mo. App. 583, Sec. 139. Oardell vs. TilcNieli, 21 N. Y. 336, Sec. 42. Carver vs. Carver, 77 Tnd. 498, Sec. 19. TO. Carver, 115 Ind. 539, Sec. 188. Carson vs. Reid, 137 Cal. 253, Sec. 96. Carson Assn. vs. Miller, IB Nev. 327, Sec. 77. Carey vs. State, 34 Ind. 106, Sec. 163. Carnahan vs. Tousey, 93 Ind. 5<>1, Sec. 142. Carmichael vs. Holloway, 9 lud. 510, Sec. 181. Carothers vs. Mcllhenny, 63 Tex. 138, Sec. 204. Carithers vs. Stuart, 87 Ind. 424, See. 245. Carrawlay vs. Walace, VI Sou. Rep. (Miss:) 930, Sec. 214. Carlisle vs. WilkinS', 51 Ala. 371, Sec. 2S5-. Case vs. Howard, 41 Iowa 479, Sec. 85. vs. Hulteebush, 122 Ala. 212, See. 170. vs. Luse, 28 Iowa 527, Sec. 58. Casey vs. Peebles, 13 Neb. 7, Sec. 21. Cass County vs. AmsT. Ex. Bank, I'l N. D. 238, Sec. 1141 Cass Co. TO. Beck, 76 Iowa 487, Sec. 1'39'. Cason vs. Connor, 83 Tex. 26, See. 245. Casoni vs'. Jerome, 58 N. Y. 315, Sec. IS. Casper vs. Kent Circuit Judge, 45 Mich. 261, Sec. 216. vs. People, 6 III. App. 28, Sec. 164. Cash vs. Peopfe, 32 111. App. 260, Sec. 164. Cassiel- vs. Hales, 1S9 Mass; 461, Sec. 172. Casky vs. Haviland, 13 Aia. 314, Sec. 174. Castling vs. Aubert, 2 East 325, Sec. 41. Cassel'berry vs. Warren, 40 111. App. 6^6, Sec. 110. Cathcart vs. Foulke, 13 Mo. 561, See. 275. Catlett vs. Brodie, 9 Wheat. 5S3, Sec. 179. TABLE OP CASES. 587 (References are to sections.) Cauthorn vs. Berry, 69 Mo. App. 404, Stec. 249. vs. Weisinger, 6 Ala. 714, Sec. 276. Couthron Lumber Co. vs. Hall, 76 Ark. 1, Sec. 36. Cavazos vs. Trevino, 6 Wall. 773, iSlec. 49. Cawley, et al., vs. The People, 95 111. 249, Sec 15, 20, 106, 150. Cayuga Bridge Co. vs. Magee, 2 Paige 22, 116, Sec. 179. Cellers vs. Maechem, 49 Ore. 186, Sec. 91-a. Central Banking & Surety Co. vs. U. S. Fid. & Guar. Co., 80 3. E. 121, Sec. 219. Central L. Co. vs. Kelter, 201 111. 503, Sec. 11. Central Savings Bank vs. Shine, 48 Mo. 456, iSec. 66. Chaddock vs. Vanness, 35 N. J. L. 517, iStec. 10. Chaffee vs. Jones, 19 Pick. 260, Sec. 8, 10. vs. U. S. Fid. & Guar. Co., 128 Fed. 918, Sec. 76-a. Chambers vs. Prewett, 172 111. 615, iSbc. 255. Chase vs. Beraud, 29 Cal. 138, Sec. 186. vs. Hathorn, 61 Me. 505, Stec. 108. vs. Ingalls, 97 Mass. 524, iStee. 172. vs. McDonald, 7 Har. & John. 160, Sec. 2. Champion vs. Griffith, 13 0. 228, iStec. 8, 9. Champion I. Co. vs. American Bonding Co., 115 Ky. 863, Sec. 233. Champlain vs. People, 2 N. Y. 82, Sec. 231. Chalaron to. McFarlane, La. (Curry) 227, Sec. 20. Chafoin vs. Rich, 77 Oal'. 476, See. 61. Charaock vs. Jones, ri5 N. W. 1W2, Sec. 259. Chapin vs. Lapham, 20 Pick. 467, Sec. 3il. vs. Merreir, 4 Wend. 667, Sec. 265. Chadwick vs. Eastman, 53 Me. 12, Sec. 74, 75. Charlotte U. R. Co. vs. Gow, 59 Ga. 6«6, See. 107. Chapman vs. Bkick, 5 Scotts Rep. 5a5, Sec. 128. Chalfant vs. Payton, 9il Ind. 202, Sec. ISS. Chlanoel'I'or vs. Hoxsey, 41 N. J. L. 217, Sec. 142. Ohandler vs. Higgins, 109 111. 602, Sec. 249, 251. vs'. Rutherford, I'Ol Fed, 774, Sec. 165. vs. State, 1 Lea (Tenn.) 296, Sec. 163, 172. vs. Thornton, 4 B. Mon. (Ky.) 360, Sec. 188. Chandler Lumber Co. vs. Radke, 136 Wis. 495, Sec. 76, 80. Chamberllain vs. Belter, 18 N. Y. 115', Sec. ]i64'. vs. Godfrey, 3i6 Vt. 380, Sec. 177. C'liarles vs. Haskins', M Iowa 3.29, Sec. 164. vs. Hoskins, 14 Iowa 471, Sec. 176. Cliarles City Plow Co. vs. Jones, 71 Iowa 234, Sec. 204. Chapline vs. Robertson, 44 Ark. 202, Sec. 206-. Chapeze vs. Young, 87 Ky. 476', See. 264. Ctiester vs.. Broderick, 131 N". Y. 549, Sec. 189. VS'. Kingston Bank, 16 N. Y. 336, Sec. 25T. vs. Leonard, 68 Conn. 495, See. 73., 79. Clieltenham Fire Brick Co. vs. Cook, 44 Mo. 29^ Sec. IBS. Cheyboygan vs. Erratt, 110 Mich. 156, Sec. 163. Chemical' Bank vs'. Arrastrong, 59 Fed. Rep. 372, See. 2S2. Cherry vs. Wilson, 76' N". C. 1.64, See. 263. 538 TABLE OF CASES. (References are to sections.) CJhicago VB. Agiaew, 264 111. 288, Sec. 76a. Chicago A. & N. R. R. vs. Whitney, 143 Iowa 506, Sec. 197. Chicago B. & Q. Ry. vs. Bartlett, 120 111. 603, Sec. 130. Chicago vs. Gage, 95 111. 593, iStee. 21, 168, 174, 177. Chicago City Railway Co. vs. Howison, 86 111. 215, Sec. 196. Chicago Trust & >Sav. Bank vs. Nordgren, 157 111. 633, Sec. 8. Chicago & A. R. E. Co. vs.. Higgins, 58 111. 128, Sec. 130. Child vs. N. Y. & N. E. R. R. Co., 129 Mass. 170, Stec. 248. vs. Pearl, 43 Vt. 224, Stec. 25. YB. Powder Works', 44 N. H. 364, See. 280, 282, Childers vs. Talbott, 16 Pac. Rep. (N. M.) 275, Sec. 28. Chickasaw Co. vs. Pitcher, 36 Iowa 593, Sec. 85. Chilton vs. Chapman, 13 Mo. 470, Sec. 274. vs. Eobbins, 4 Ala. 223, Sec. 88. Chipman vs. Todd, 60 Me. 282, Sec. 114. ChUenliall vs. Hines, LOO S. W. 362, Sec. 208. Chjpstead vs. Porter, 63 Oa. 220, Sec. 172. Chipps vs. Hartnoia, 4 B. & S. 414, Sec. .27». Chitwood vs. Hatfield, l.S'6 Mo. App. 688, Sec. 1«. Chorn vs. Merrill, 9 La. Ann. 533, Sec. 10. Choate vs. Arrlngton, 116 Mass. 552, Sec. 218. vs. Jacobs, 136 Mass. 297, Sec. 217. vs. Thorndike, 138' Mass. 3T1', Sec. 2118. Chrisman vs. Hodges, 76 Mo. 413, Sec. 49. vs. Jones, 34 Ark. 73, Sec. 263 . vs. Rogers, 30 Ark. SSI, Sec. 207. vs'. Tuttic, 59 Ind. 156, Sec. 116. Christian & Gunn vs. Keen, 80 Va. 369, Sec. 73. ChriB.tal vs. Kelly, 88 N. Y. 2i85i Sec. 206. Church vs. Noble, 24 m. 291(, Sec. 20, IBl. vs. Simmons, 83 N. Y. 2i61, Sec. 1B9. ChurchUl vs. Abraham, 22 111. 466, Sec. 204. Chute vs. Pattee, 37 Me. 102, Sec. 88. Citizens Bank vs. Douglass, IBl S. W. 601, Sec. 43. vsi. EUliott, 9 Kas. App. 797, Sec. lOJ. vs. Whinery, I'lO Iowa 390, Sec. 96. vs. Wiegand, IE Phila. Rep. 496, Sec. 130. Citizens Loan Assn. vs. Nugent, 40 N. J. L. 21B, Sec. 129. Citizens Nat. Bank vs. Burch, 145 N. C. 316, Sec. 278. Citizens Trust, etc., Co. vs. Globe, etc. Fire Insurance Co., 229 Fed. 326, Sec. 13.0. Citizens Trust Co. vs. Tindle, 272 Mo. 681, Sec. 16. Citizens Trust & Guaranty Co. vs. Ohio Valley Tie Co., 138 Ky. 421, Stec. 197. City of Philadelphia vs. Ray, 266 Pa. 345, See. 73, 132, 238. City of Topeka vs. Federal Union Surety Co., 213 Fed. 968, Sec. 238. City Bank vs. Luckie, 5 Ch. App. 733, Sec. 256. vs. Young, 43 N. H. 457, Sec. 99. City National Bank vs. Dudgeon, 65 111. II, iStec. 250. vs. Jordan, 139 Iowa 499, Sec. 15. vs. Phelps, 86 N. Y. 484, Sec. 18, 66. Clark vs. Bank of Hennessey, 14 Okla. 572, Sec. 122. VB. Barnard, 108 U. iS. 436, 459, iSfec. 136. vs. Billings, 59 Ind. 509, Sec. 97. TABLE OP CASES. 539 (References are to sections.) Clark vs. Bryan, 16 Md. 171, Sec. 20G. vs. Bryce, 64 Ga. 486, Sec. 23-a. vs. Chamberlain, 112 llasa. 19, Sec. 20. vs. Clayton, 01 CaJ. 634, Sec. 193. vs. First Nat. Bank, 57 Mo. App. 277, Sec. 248. vs. Fredenburg, 4& Mich. 283, Sec. 221. ■». Geratltey, 204 U. S. 5M, Sec. 84. vs. Jones', 85 Alia. 127, Sec. 41. vs. Logan County, 138 Ky. 676, Sec. 168. vs. Mallory, 185' 111. 227, Sec. 110. vs. MiMer, 54 N". Y. 528^ Sec. 172. vs. Osborn, 41 0. S. 28, Sec. Ili5. vs. Remington, 11 Met. 361, Sec. 6». vs. Sicklcr, 64 N. Y. 231, Sec. 96. vs. Thayer, 105 Mass. 216, Sec. 71. vs. Wilkinson, 50 Wis. 543, Sec. 1.'56. vs. Wilsttn, 103 Mass. 219, Sec. 248. Clancy vs. Kenworthy, 74 la. 740, Sec. 164. vs. Piggott,, 2 Ad. & Ell. 473, Sec. 26. Classon vs>. BiMman, 161 Ind. 610, Sec. 66. Claflin VB. Ostrom, 54 N. Y. 5»1, Sec. ."1. Clagett vs. Salmon, 5 GM. & Johns. (Md.) 344, Sec. 77. Clapp vs. Rice, 15 Gray 557, Sec. 114, 270. Clay vs. Edgeirton, L9 0. S. 549', Sec. 61, 67. vs. Freeman, 74 Miss. 816', Sec. 255. vs. Severence, 56 Vt. 300, Sec. 279. Ciay Center vs. Williamson, 70 Kan. 483, Sec. 196. Clay Lumber Co. vs. Hart's Branch Coal Co., 174 Mich. 613', Sec. 42. Clerk vs.. Withers, 2 Ld. Raym. 1072, Sec. 187. Clements' vs. Schuylkill R. R. Co., 132 Pa. 445(, See. 135'. ainton Bank vs. Ayres, 16 0. 283, Sec. 78. Clopton vs' Spratt, 52 Miss. 2'51, Sec. 99. Cliopton, Exr., vs. Hall, 6.1 Miss. 482, Sec. 9. Cl'ough VS-. Seay, 49 Iowa IW, Sec. 74 Clow vs. Derby, 98 Pa. 432, Sec. 98. CItoWBon vs. Barbiere, 4 Sneed 385, Sec. 10. Clute vs. Small, 19 Wend 23S, Sec. 7'4. vs. Kinesi, 102 N. Y. 377, Sec. 17. Coan vs. Pafcridge, 9» N. Y. S. 570, Sec. 53. Cobb vs. Haynes, 8 B. Hon. (Ky.) 137, Sec. 263. vs. Page, 17 Bai 469i, Sec. 57. Coburn vs. Townsend, 103 Cal. 233, Sec. 146. Cocks vs. Barker, 40 N. Y. 107, Sec. 126. Cochrum vs. West., 122 Ind. 372, Sec. 244. Cochran vs. Peopte's Ry. Co., 113 Mo. 350, Sec. 135. vs. Walker, 82 Ky. 220, See. 276. V9. Ward, 5 Ind. App. 89, Sec. 47. vs. Wood, 29 N. C. 21S, Sec. 181. 540 TABLE OF CASES. (References are to sections.) Cochrane vs. Cushing, 12i4 Mass. 219, Sec. 100. Codman vs. Rogers, 10 Pick. 112, Sec. 178. vs. Vt. & C. R. Co., m Blatchf. 165., Sec. 51. Coe vs. BueWer, 110 Pa. 366, Sec. 66. vs. N. J. Midlland Ry. Co., SI N. J. Eq. im, Sec. ^45^ vs. Vodges, 71 Pa. 383, Sec. 119. Coffin vs. Trustees, 92 Ind. 337, Sec. 16, 57. Cogburn vs. Spencc, 15 Ala. 549, Sec. 172. Coggeshall vs. Rugglies, 62 111-. 40i, Sec. 282. Cohea vs. Commissioners, 15 Miss. 437, Sec. 95. Cohen vs. Wright, 22 Cal'. 203, Sec. 145. Cohn vs. Lehmian, 93 Mo. 574, Sec. 193. Cole vs'. Dyer, 1 Cromp. & Jerv. 461, Sec. 2(8. vs. Fox, 83 N. C. 463, Sec. 112. vs. Just-ice, 8 Ala. 793, Sec. 258. vs. Makomb, 66 N. Y. 363, Sec. 259. vs. Merchants' Bank, 60 Ind. 350', Sec. 61. vs. Smith, 29 La. Ami. 55], Sec. 112. Cole Co. vs. Dal'lineyer, 101 Mo. 57, Sec. 146. Coleman vs. Fuller, 105 N. C. 328, Sec. 6. vs. State, 10 Md. 168, Sec. 329, 330. Cdlgrove vs. Talltoan, 67 N. Y. 95., See. 23, 80, 116. Colt vs. Root, 17 Mass. 229, Sec. 51. vs. Scars Commercial Co., 20 R. I. 64, Sec. 248. Colter vs. Morgan, 12 B. Mon. (Ky.) 278, Stec. 1S2. College Park Elec. Belt Line vs. Ide, 15. Tex. Civ. App. 273, Sec. 57. Colwell vs. Lawrence, 38 N. Y. 74, Sec. 135. Collins vs. Everett, 4 Ga. 266, Stec. 10. vs. Huffman, 48 Wash. 184, Stec. 197. vs. Mayor, 3 Hun 680, Stec. 145. vs. Prosser, 1 Barn. & Cr. 682, iSec. 114. vs. Skillen, 16 0. S. 382, Sec. 156. vs. Trlst, 20 La. Ann. 348, iSec. 10. Collier vs. Betterton, 87 Tex. 440, Stec. 135. vs. Windham, 27 Ala. 291, Sec. 139. Colby vs. Meservey, 85 lovra 555, Stec. 196, 197. Colquitt vs. Smith, 65 Ga. 341, Stec. 229. Colcord vs. Sylvester, 6 111. 540, Stec. 195. Columbia Amusement Co. vs. Pine Beach Inv. Co., 109 Va. 325, Stec. 195. Columbia Avenue Trust Co. vs King, 27 Pa. 308, Stec. 23a. Columbia Co. vs. Massie, 31 Oreg. 292, See. 154. Columbia, etc., R. R. Co. vs. Braillard, 12 Wash. 22, Sec. 183. Columbus, Hocking Valley & Toledo Ry. Co. vs. Burke, 54 0. S. 98, Stec. 193. Columbus Stewer Pipe Co. vs. Ganser, 58 Mich. 385, Sec. 50. Comey vs. United Surety Co., 217 N. Y. 268, Stec. 233. Commercial Bank vs. Henninger, 105 Pa. 496, Stec. 101. vs. Provident Inst, 59 Kas. 361, See. 51. vs. Wood, 56 Mo. App. 214, Sec. 90. Commercial & Farmers Nat. Bank vs. McCormick, 97 Md. 703, Stec. 93. TABLE OP CASES. 541 (References are to sections.*) Ck)mmonwealth vs. Allen, 157 Ky. 6, Sec. 232. vs. Amer. Bonding & Tr. Co., ]i6 Pa. Super. Ct. 570, Sec. 2a4 vs. BrasBfield, 7 B. Mon. (Ky.) 447, Sec. 174. VB. 'Ches. & Ohio Oanial Co., 32 Md. 501, Sec. 245, iS8. vs. Comly, 3 Pa. 372, Sec. 167. vs. Drewry, 15 Gratt. (Va.) 1, Sec. 153. vs. DUl', 1 Phila. Rep. 5&6, Sec. 220. vs. Evans, 74 Pa. 124, Sec. 145. vs. Fidelity & Deposit Coi, 180 Fed. 292, See. 167. v». Flemming, 15 Ky. L. Rep. 491, Sec. 232. vs. Godshaw, 13 Ky. L. Rep. 572, Sec. 160. vs. Green, 13S Mass. 200, See. 186. vs. Holdnes, 25 Gratt. 7T1, Sec. 152. vs. Julius, 173 Pa. 322, Sec. 226. vs. MagnoMa Vila Land Co., 163 Pa. 99, See. 200. vs. Meyer,, 170 Pa. 380, Sec. 208. vs. Overby, 80 Ky. 208, Sec. 232. vs. Pray, 125 Pia.. 542, Sec. 224. vs. Rogers, 53 Pa. 470, Sec. 223. vs. Swope, 45 Pa. 535, Sec. 161. vs. Stockton, 5 T. B. Mon. (Ky.) 182, Sec. 164 vs. Teevens, 143 Mass. 210, Sec. 231. vs. Terry, C3 Ky. 383, Sec. 232. vs. Toms, 45 Pa. 408, See. Ifi4. vs. Wistar, 142 Pa. 37.'!. S<'c. 1S2. Comstock vs. Gage, 91 III. 32S, Sec. i:^. vs. Norton, 36 Mich. 277, See. 42. Comparee vs. Brockway, 11 Humph. 355, Sec. MX Comer va. Baldwin, I'e Minn. 172, See. 123. Concrete Steel Co. vs. Illinois Surety Co., 163 Wis. 41, Sec. 131. Conger vs. Babbet, 67 Iowa 13, Stec. 10. Conn vs. 'State, 125 Ind: 514, Sec. 76a, 126. Conaway vs. Slweeney, 24 W. Va. 643, Sec. 30. Connecticut Insurance Co. vs. Scott, 81 Ky. 540, Sec. 107. Connecticut Mutual Life Ins. Co. vs. Scott, 81 Ky. 540, Sec. 53. Connecticut Life Ins. Co. vs. Chase, 72 Vt. 176, Sec. 106, 127. Couoprd vs. Pillsbury, 33 N. H. 310, iStec. 117. Conner vs. State, 30 Tex. 94, Sec. 232. Connor vs. Corson, 13 S. D. 550, Sec. 176. Cony vs. Barrows, 46 Me. 497, Stec. 177. Connelly vs. Bourg, 16 La. Ann. 108, Sec. 249. Consolidated Co. vs. Musgrave, 1 L. R. Ch. Div. 37 (1900), Sec. 279. Conover vs. Hill, 76 111. 342, Sec. 273. Cont. & C. Nat. Bank vs. Cobb, 200 Fed. 511, Sec. 115. Conwell vs. MoCowan, 53 111. 363, Sec. 245, 250. vs. Voohees, 13 0. 523, iSec. 170. Cook vs. Caraway, 29 Kas. 41, Sec. 12. vs. Chapman, 41 N. J. Eq. 152, Stec. 196, 197. vs. Freudenthal, 80 N. Y. 205, Stec. 111. vs. Ligon, 54 Miss. 625, Sec. 185. vs. Southwick, 9 Tex. 615, Sec. 8. 542 tabm; of cases. (References arc to sections.) Cooke vs. White Com. School Dist., 33 Ky. Law Rep. 926, Seq. 76a. Coots vs. Farnsworth, 61 Midi. 497, Sec. 112. Coombs vs. Harford, 09 Me. 420, Sec. 139. Coope vs. Twynam, Turn. & Russ. 426, Sec. 2fi3. Cooper, In re, 22 N. Y. 07, Sec. 145. Cooper vs. Middleton, 94 X. C. S6, Sec. 25S. vs. Parker, 176 ATa. 122, Sec. 279. vs. Rhodes, 30 La. Ann. .533', Sec. 188. Cooper Process Co. vs. Chicago Bonding & iSurety Co., 262 Fed. 66, Sec. 106, 127. Coon vs. McCormack, 69 Iowa 639, Steo. 186. Coons vs. Clifford, 58' 0. S. 490, Sec. 2i5S. Coonradt vs. Campbell, 29 Tva.^. 3(11, Sec. 188. Co-operative Assn. vs. Roiii; 32 Kan. 603, Sec. 182. Copis vs. Middleton, Turn. & Russ. Cli. Rep. 224, Sec. 349. Copeland vs. Dixie Lumber Co., 4 Ala. App. 230, Sec. 188'. Copejand & Brantley vs. Cunningham, 63 Ala. 394, Sec. 20, 121, 194. CornwelT vs. Holly. 5 Rich. 47, See. S3. Cornell vs. The People, 37 111. App. 4*>0, Sec. 108, 164. Corielle vs. All'en, 13 Iowa 289, Sec. 83. Corbctt vs. Waterman, 11 Iowa Sfi, Sec. flO. Corporation of Huron vs. Armstrong, 27 Up. Can. (Q. B.) 533., See. 111. Com Exchange Bank vs. Blye, 102 X. Y. 305, Sec. 212. , Corrigan vs. Foster, Admx., 51 0. S. 225, Sec. 218. Cortelyou vs. Hoagland, 40 N. J. Eq. 1. Sec. 34. vs. Maben, 40 Neb. 512, Sec. 201. Corkins vs. Collins, 16 Mich. 478, Sec. 41. Corydon Dep. Bank vs. McCllire, 140 Ky. 149, Sec. So. Cosgrove vs. Cumming's, 195 Pa. 497, Sec. 122. Crosgrove Brewing & Malting Co. vs. Starrs, 5 Ont. 169, Sec. 54. Coaand vs. Bunker, 2 S. D. 294, Sec. 4'6. Costello vs. Bridges, 142 Pae. 6S7, Sec. 187. 'CoBttey vs. Allen, 56 Ala. 198, See. 154. Coster vs. Mesner, 58 Mo. 549, Sec. 83. Cotrell's Appeal, 23 Pa. 294, Sec. 249. Cotton vs. Alexander, 32 Kan. 339, Sec. 279. County of Glenn vs. Jones, 146 Cal. 518, Sec. 76b. County of Spokane vs. Allen, 9 Wash, 220, Sec, 152. County Board vs. Bateman, 102 N. C. 52, Sec. 154. County vs.. Tower, 28 Minn. 45, Sec. 154. Coughran vs'. Sundback, 13 S. D. 115, Sec. 181. Coulthart vs. Clementson, 5 Q. B. Div. 412, Sec. 71. Court of Probate vs. Smith, 16 R. I. 444, Sec. 223. Covey vs. Neflf, 63 Tnd. 391, Sec. 245. vs. Schiesswohl', 50 Colo. 68, Sec. 17. Coverdale vs. Alexander, 82 Ind. 503, Sec. 211. Cowles vs. Peck, 56 Cpnn. 251, See. 16, 62. vs. U. S. Fidelity & Guar. Co., 32 Wash. 120, Sec. 7«a. Oowdin vs. Gottgetreu, 55 N. Y. 650, Sec. 36. Cowenhoven vs. Howell, 36 N. J. L. 323, Sec- 41. TABLE OP CASES. 543 (References are to sections.) Oowan Vs. Baird, 77 N. C. 201, iSec. 111. vs. Roberts, 134 N. C. 415, iSee. 66, 109. vs. Telford, 5 Lea (Tenii.) 449, Stec. 255. Cbwdery vs. Hahn, 105 Wis. 455, Sec. 76a. Cowgill vs. [Llnville, 20 Mo. App. 138, Sec. 248. Cowel vs. Anderson, 33 Minn. 374, Sec. 128. Cowles vs. U. 19. F. & G. Co., 32 Wash. 120. 'Stee. 233. Cox vs. Brown, 51' N. C. 100, Sec. 67. vs. Mobile Co., .37 Ala. 320, Sec. 83. vs'. Mulhollan, 6 Mart. (La.) 649, Sec. 167. vs. Taylor's Adm., 10 B. Men. 17, Sec. 19& Craig vs. Parkis, 10 N. y. 16a, Sec. 63. vs. Phipps-, 23 Miss. 240, Sec. 61. Craighead vs. Swartz, 219 Pa. SL 149, Sec. 281. Crane vs. Andrews, 10 Colto. 265, Sec. 188. vs. Damp, 12 Conn. 4«4, Sec. 169. vs. Pacific Heat & Power Co., 36 Wash. 95, Sec. 96. vs. Pbwell, 180 N. y. 379, Sec. 25. vs. Weymouth, 54 Cal. 476, Sec. IBS. vs. Whcekr, 48 Minn. 207, Sec. 63. Crane Co. vs. Specht, 39 Neb. 123, Sec. -50. Cramer vs. Title, 72 Cal. 12, Sec. 13. Craft vs. Isham, 13 Conn. 2«, Sec. 66. Crafts' vs. Mott, 4 N. Y. 603, Sec. 304. Cragoe vs'. Jones, L. R. 8 Ex. 81, Sec. 102. Cranor vs. Reardon, 39 Mo. App. 306, Sec. 186. Cranmer vb. McSwords, 2* W. Va. 412, Sec. 282, 283. Cravey vs. State, 26 Tex. App. 84, Sec. 231. Crawford vs. Atlantic Coast Lumber Co., 88 S. C. 4,%, Sec. 195. vs. Gaulden, 33 Ga. 173, See. 90. vs. Howard. 9 Ga. 314, Sec. 170. vs. Owens, 79 S. C. 59, Sec. 23a. vs. Richeeon, 101 III'. 351, Sec. 26T. vs. Sterling. 4 Esp. 207, Sec. I'l. V9. Turnbaugh, Trustee, 86 0. S. 43, Sec. 118. Crawn vs. Commonwealth, 84 Va. 282, Sec. 1516. Craythorne vs. Swinburne, 14 Ves. .Ir. 164, Sec. 262, 264. Cremer vs. Higginson, 1 Mason 323, Sec. 84, 66. CreswelTi vs. Herr, 9 Col. App. 185, Sec. 1S4. vs. Woodside, 15 Col. App. 468, Sec. 201. Crears vs. Hunter, 19 Q. B. Div. 341, Sec. 57. Creager vs. Brengle, 5 Harr. & J. (Md.) 234, Sec. 247. Crira vs. Fitch, 58 Ind. 319, Sec. 31. vs. Fleming, 101 Md. 154, Sec. 99. vs. Wilson, 61 Miss. 233, Sec. 103. Crist vs. Burlingame, 62 Barb. (^^ Y.) 351, Sec. 60. Crittenden vs. Fiske, 46 Mich. 70, Sec. 60, 66. Crisfield vs. State, 5& Md. 192, Sec. 247. &'*4- TABLE OP CASES. (References are to sections.) Crosby vs. Bonchard, 82i Vt. 66, Sec. 299. vs. Woodberry, .37 Col. 1, Sec. 99. Cross vs. Ballard, 46 Vt. 415, Sec. 117. vs. Rowe, 22 N. H. 77, Sec. 78. vs. State Bank, 5 Ark. 52S, Sec. 109. Crow vs. Conant, 9C Mich. 247, Sec. 218. vs. Crow, 53 Ky. 383, See. 222. Ci-oweM vs. Hospital of St. Baraabas, 27' N. J. Eq. 650, Sec. 142. Crooks vs. Propp, 66 N. Y. S. 753, Sec. 58. Crook vs. People, 106 111. 237, Sec. 145'. Cronin vs. Stoddard, 97' N. Y. 271, Sec. 150. Crounse vs. Syracuse, C. & N. Y. R. R. Co., 32 Hun 497, Sec. 197. Croucli vs. Edwards, 52 Ark. 499, Sec. 22il. Grouse vs. Wagner, 41 0. S. 470, Sec. 264. Croswell' vs. Labree, 81 Me. 44, Sfee. 74. Cnim vs. Wilson, 61 Miss. 23i3, Sec. 19. Cummi-ng vs. Brown, 43 N. Y. 514, Sec. 164. Cudahy Packing Co. vs. Shephard, 37 Tex. Civ. App. li See. 76. Culver vs. Fidelity & Deposit Co., 149 Mich. 630, Sec. 185. vs. Reno Real Estate Co., 91 Pn. St. 367, Sec. 11, 148. Cummings vs. Gann, 52' Pa. 48S, Sec. 209. vs. Little, 451 Me. 183, Sec. 98. Cumberland vs. Pennell, 69 Me. 357, See. 167. Cumberland Class Mfg. Co. vs. Wheaton, 208 Mass. 425, Sec. 49, 66, 67. Cumberland Co.xl & Iron Co. vs. Hoffman, 39 Barb. 16, Sec. 195. Cunningham vs. Finch, 8 N. W. (Neb.) 168, Sec. 197. vs. Hawkins, 163 Mich. 317, See. 122. vs. AVrenn, 23 111. 62, Sec. 128. Curtis, In re, 64 Conn. 501, Sec. 49. Curtis vs. Brewer, 17 Pick. 513, Sec. 1135. vs. National Bank, 39 0. S. 579, Sec. 221. vs. Parks, 55 Cal. 106, Sec. 275. vs. Smial'Iman, 14 Wend. N". Y. 231, Sec. 62. vs. Tyler, 9 Paige 432, Sec. 256. Curtiss vs. Bachman, 110 Cal. 433, Sec. 197. Curiae vs. Packard, 29 Cal. 194, Sec. 96. Currier vs. Baker, 51 N. H. 618, Sec. 273, 276. vs. Fellows, 27 N. H. 366., Sec. 10. Curd vs. Forts, 9 Ky. 119, Sec. 182. Curry vs. Curry, 87 Ky. 667, Sec. 259. vs. Hale, et al., 15 W. Va. 867, See. 23.. Curtin vs. Patton, 11 Serg. & R. 30'5-, Sec. 11. Gushing vs. Cable, 48 Minn. 3, Sec. 59. Cutler vs. Balitoo, 136 Mass. 337, Sec. 18, 60. Cutter vs. Emery, 37 N. H. 567, Sec. 267. Cyclone Steam Snowplow Co. vs. Vulcan Iron Wks, 52 Fed. Rep. 920, fScc. 214. C. & W. Coel Co. vs. LiddelV, (i1) III. 639, Sec. 40, 46. TABLE OF CASES. 545 (References are to sections.) D DaggHt VB. Mensch, 141 111. 395, Sec. ISH. Dahlraan vs. Hammel), 45 Wis'. 466, Sec, 16, 57. Dair vs. United States, 16 Wall 1, Sec. 74, 109, 127. Daly vs. Busk Tunnel Ey. Co., 129 Fed. 513, Sec. 7ea. vs. Old, 35 Uta-h 74, Sec. 16. Damon vs. Empire State Sur. Co., 161 App. Div. 875, Sec. 104, 106. Damron vs. Sweetscr, !« 111. App. 330, Sec. 208. Dana vs. Conant, 30 Vt. 2'46, Sec. 63. Dana, Executor, vs. Parker, 27 Fed. 2S3, Sec. 143. Dane vs. Corduan, 24 Cal. Ii57, Sec. 115. vs. Gilraoire, 51 Me. 544, Sec. 176. Dangel vb>. Levy, 1 Idaho 722, Sec. 133. Dangler vs. Baker, 36 0. S. 673, Sec. 15, 57, 127. Daniel vs. Ballard, 2 Dana (Ky.) 290, Sec. 267. Daniel Co. vs. Dickey, & Ga. App. 548, Sec. 38. Daniels, et al., vs. Barney, 22 Ind. 207, Sec. IS, 138. Danker vs. Atwood, 119 Mass. 146, Sec. 20, lai. Darst vs. Bates, 95 HI. 493, See. 43.: Darby vs. Bernev NatlL Bank, 97 Ala. 64.3, See. 11®. Daum vs. Kehnast, 18 0. C. C. 1, See. 273. Davany vs. Koon, 45i Miss. 71, Sec. 173. Davenport vs. State Banking Co., 126 Ga. 136, Sec. 101. Davis vs. Banks, 45 Ga. 138, Sec. 40. vs. Barrington, 30 N. H. 517, See. 112. vs. BlackweU, 5 111. App. 32, Sec. 11. vs. Board of Cominissioners of Stokes Co., 72 N. C. 441, Sec 284. vs. Buckles, 89 111. 237, Sec. 108. vs. CommiBsioners, 72 N. C. 44i', Sec. 104. vs. Davis, 69 Atl. 876, Sec. 259. vs. GiMett, 52 X. H. 126., Sec. 13S. vs. Harding, 3 Allen, 302, See. 215. vs. Hoopes, ."iS Miss. 173, Sec. 280. vs. O'Brj-ant, 23 Ind. App. 376', Sec. 183. vs. Old Colony R. R.', lOT Mass. 258, Sec. 11. vs Patrick, 141 U. S. 479', Sec. 39, 118', 187. vs. People, 1 Gilm. I'll'. 409, Sec. 87. vs. Shafer, 50 Fed. 764, Sec. 49. vs. Shields, 26 Wend. 341, Sec. 30, 12.2. vs. Sbatts, 43 Ind. 103, Sec. 104: vs. South Carolina, 107' U. S. 597, Sec. 230. vs. Toulmin, 77 N. Y. 280, Sec. 274. vs. Weills, 104 U. S. 159, Sec. 5, 1'6, 48, 50, 61;, 65:, 68. Davis Sewing Machine Co. vs. Richards, 115 U. S. 524, Sec. 65. Davies vs. Carey, 72 Wash. 537, Sec. 39. vs. Fuiniston, 45 Upper Can. (Q. B.) 369, Sec. 16, 57l vs. Humphries, 6 M. & W. 153, Sec. 269. vs. London & P. Mari'ne Ins. Co., L. R. Ch. Div. 46®, Sec. 106. 546 TABLE OF CASES. (References are to sections.) Dawe vs. Morris, 1^49 Mass. 188, Skc. 110. Dawson vs. Lee, 83 Ky. 49, Sec. 2:>d. _, vs.' State, 3« 0. S. 1, Sec. 1'52. Day vs. Ctoe, 4 Bush ."je-S, Sec. 38. vs. Elmore, 4 Wis. 190. Sec. 09. vs. McPhee, 41 Col'. 4'67, Sec. I'ST. vs. Ramey, 40 0. S. 446, Sec. 98. Dayton vs. Lynes, 30 Conn. 331, Sec. 147. Deal vs. Cochran, 66 X. C. 269, Sec. 81. Dean vs. Rice, RS Khs. fi91. Sec. 92. vs. Sedan Milling Co., 19 Cal. App. 28, Sec. 83. vs. Ta,llman, 10.5 Mass. 443, Sec. 36 vs. Walker, 107 IH. 540, Sec. 30. Dean & Co. vs. Collins & Manhood, 15 K. D. 535, Sec. 23, 90. Dearborn vs. Richardson, 108 Mass. 565, Sec. 206. Dea^re vs. Soutten, L. R. 9 Eq. IBl, Sec. 259; Deardorff vs. Foresman, 24 Ilid. 481, Sec. 111. Deason vs. Gray, 189 Ala. 672, See. 170. Deatherage vs. iSheidley, 50 Mo. App. 490, SleC. 185. Iteek vs. Works, 37 How. Pr. 292. Sec. 67. Decker vs. Decker, 9 Al.a. App. 241, Sec. 181, 220. Dedhara Bank vs. Chickering, 3 Pick. 335, Sec. 129. Dedge vs. Branch, 94 Ga. 37, Sec. 151. Dedrick vs. Den Bleyker, So Mich. 473, Sec. 90. Deering vs. Winehelsea, 2 B. & P. 270, Sec. 262, 26.3', 268'. Deering & Co. vs. Mortell, 110 N. W. 86, Sec. 66. Deeir Lodge Co. vs. At., 3 Mont. 168, Sec. 231. vs. U. S. Fid. & Guajr. Co., 42 Momt. S'lS, Sec. 122, 148, 149.. 316, DeGreiff vs'. Wilsoii, 30 N. J. Eq. 433, Sec. 176. DeJernette vs. Fidelity & Casualty Co., 98 Ky. 568, Sec. 239. Deish©r vs. Gehre, 46 Kan. 583, Sec. 1B8. Deitzler vs. Mishler, 37 Pa. 82, Sec. 248. Dedlawaire Ins. Co. vs. Pa. Fire Ins. Co., 1216 Ga. 380, Sec. 43. Delaware, L. & W. R. R. Co. vs. Oxford Iron Co., 38 N. J. Eq. 151, Sec. 282. Delaware Co. Nat. Bank vs. King, 95 N. Y. S. 954, Sec. 48, 68. Demeritt vs. Bickford, 58 N. H. 523, Sec. 34. Demott vs. FieM, 7 Cow. 5®, Sec. ia9. vs. Stockton, 32 N. J. Eq. 124, Sec. 255. Dempsey vs. Bush, 1& 0. S. 376, Sec. 249, 261'. Denio vs'. State, 60 MisB. 94*), Sec. 76, 152. Denton vs. Butler, 99 Ga. 264, Sec. 106. Dennie vs. Smith, 128' Mass. 143, Sec. 177. Dennis vs. Gillespie, 24 MisB. 581', Sec. 262. Denison University vs. Manning, 65' 0. S. 138, Sec. 90. Dennison vs'. Barney, 49 Colo. 442, See. 45. VS'. Mason, 36 Me. 431, See. 182'. Denier vs. Myers, 20 0. S. 336, Sec. 246. Denny vs. ReynoldBi 24 Ind. 248, Sec. 218. TABLE OF CASES. 547 (References are to sections.) Dent vs. Wait, 9 W. Va. 41, iSteo. 254. Deobold vs. Opperman, 111 N. Y. 531, Sec. 16. Bepot Kealty Syndicate Co. vs. Enterprise Brewing Co., 87 Oregon 560, Steo. 11. Derosset vs. Bradley, 63 N. C. 17, Sec. 271, Desot vs. Ross, 95 Mich. 81, Sec. 259. Despres vs. Folz, 134 111. App. Ill, Sec. 76. Detroit Slav. Bank vs. Ziegler, 49 Mich. 157, iSec. 132. Devol vs. Dye, 6 Ind. App. 257, iStec. 188. Dewey vs. Clark Invest. Co., 48 Minn. 130, Sec. 63. vs. Kavanaugh, 45 Neb. 233, Sfec. 163. vs. Reed, 40 Barb. 16, Sec. 72. vs. State; 91 Ind. 173, Sec. 76a, 131. Dexter vs. Ohlander, 89 Ala. 262, iSec. 45. Dey vs. Martin, 78 Va. 1, Sec. 73. Dickason vs. Bell, 13 La. Aim. 249, Stec. 103. Dickerson vs. Ripley, 6 Ind. 128, Sec. 93. vs. Derrickaon, 39 111. 574, Sec. 67. Diehl vs. Davis, 75 Kas. 38, fifec. 81. vs. Friester, 37 0. iSi. 473, Sec. 192. Dignowitty, vs. 'Staacke, 25 S. W. (Tex. Civ. App.) 824, Sec. 185. Dillman vs. Nadelhoffer, 160 111. 121, Stec. 9, 63. Dills vs. Cecil, 4 Bush (Ky.) 579, Stec. 99. Dillon vs. Russell, 5 Neb. 484, iSee. 116. Dilley vs. State, 3 Idaho 285, Sec. 228. Dine vs. Donnelly, 121 S. W.. 685, Siec. '248. Dinsmore vs. Slachs, 133 Md. 434, Sec. 255. vs. Tidball, 34 0. iS. 411, Stec. 15, 106. Dinkins vs. Bailey, 23 Miss. 284, Sec. 220. District of Columbia vs. Gallaher, 124 U. S. 505, Sec. 128. vs. Petty, 37 App. D. C. 15«, Sec. 1B2. District of Taylor vs. Morton, 37 Iowa 553, Sec. 166, 167. Dix vs. Morris, 1 Mo. App. 9®, Sec. 218. Dixoii vs. Spencer, 59 Md. 246, Sec. So. Doane vs. EHridge, 1'6 Gray 25'4', Sec. 151. DobeOli vs. Hutchinson, 3 Ad. & Ell: 355, Sec. 29. Dobie vs. Fidelity & Casualty Co., 95 Wis. 540, Sec. 281. Dobbs vs. the Justices, 17 Ga. 624, Sec. 174. Dock vs. Boyd, 93 Pa. 92, Sec. 40. Dodd vs. The State, 18 Ind. 5©, Sec. 159. vs. Vucovich, 38 Mont. 188, Sec. 79. vs. Wilson, 4 Del. Ch. 399, Sec. 249. vs.. Winn, 27 Mo. 501, Sec. 114. Dodge vs. Zimmer, ,110 N. Y. 43', Sec. 42. Dodgson vs. Henderson, 113 111. 360, Sec. 81, 8S. Doepfner va. The State, 3© Ind. Ill, Sec. 168. Dolbeer vs. Livingston, lOO Cal. 617, Sec. 124. Dole vs. Young, 24 Pick, 250, Sec. 1, 48. Doll vs. Grume, 41 Neb. 655, Sec. 131. Domestic S. M. Co. vs. Jackson, 15 B. J. Lea 418, Sec. 15. Donley vs. Camp, 22- ATa. 659, Sec. 61. 548 TABLE OP CASES. (References are to sections.) Donnell vs. Manson, 109 Mass. 5'7<), Sec. 143. Donahue vs. Johnson, 9 Wash. 187, Sec. 197. Doniierbeirg vs. Oppenheimer, IS Wash. 290, Sec. 119. Doran vs. Butler, 74 Mich. 643, Sec. 171. vs. Davis, 43 Iowa 86, Sec. 286. Dore vs. Covey, 13 Oal. 502, Sec. 181. Dorman vs. Bigelow, 1 Flla. 281; Sec. 27. Dorsey vs. Fidelity & Casualty Co., 98 Ga. 456i, Sec. 239. Dorwin vs. Smith, 36 Vt. 69, Sec. 42. j>othard vs. Sheid, 69 Ala. 13o, Sec. 208. Dougherty vs. Dore, 63 Cal. 170, Sec. 196. Doughty vs. Savage, 28 Conn. 146, Sec. 15. Dougllass vs. Ferris, 138 N. Y. 102, Sec. 22i5. vs. Kessler, 57 lovfa 63, Sec. 224. vBi. Rathbone, 5 Hill 143, Sec. 68. VB. Reynolds, 7 Pet. 113, Sec. 18, 60, 65, 68, 99. Dover vs. Twomhiy, 42 N. H. 5fl, Sec. 153. Dowell vs. Richardson, 10 Ind. 573, Sec. 209. Downer vs. Chesebrough, 36 Conn. 39, Sec. 47. Dowling vs. Polack, 18 Cal. 6^5, Sec. 163. Dowbiggen vs. Bourne, 2 Young & Collier 462, Sec. 249. Downer vs. Baxter, 30 Vt. 467, Sec. 283. Dows vs. Swett, 120 Mass. 3v^2, Sec. 42. Downey vs. O'Donnell, 86 111. ii>. Sec. 135. Doyle vs. Nesting, 37 Col. 5'22., St*. 61. Drake vs. Seaman, 97 N. Y. 234, Sse. 27. vs. Smythe, 44 Iowa 410, Sec. }m. Draper vs. Weld, 13 Gray 5S0, Sec. 114. vs. Wood, 112 Mass. 315, Sec. 74. Draughan vs. Bunting, 9 Ired. (N. C.) 10, Sec. ,^4, 74. vs. State, 35 Tex. Cr. Rep. 51, Sec. 23i. Drew vs. Lockett, 32 Beav. 499', Sec. 250. Drinkwine vs. City of Eau Claire, 83 Wis. 428', Sec. 181. Drolesbaugh vs. HiH, 64 0. S. 257, Sec. 104. Drumheller vs. Amer. Sur. Co., 30 Wash. 530, Sec. 7Ba. Drummond vs. Prestman, 12 Wheat. 515, See. 16, .50. Drury vs. Young, 58 Md. 546, Sec. 30. Dry vs. Davy, 10 Ad. & Ell. 30, Sec. 52. Dubois vs. Mason, 127 Mass. 37, Sec, 8. Dudltey vs. Buckley, 68 W. "V'a. C30, Sec. 248. Duffy vs. Wunsch, 42 N. Y. 243, Sec. 38. Dugan vs. Champion Coal Co., 105 Ky. 82)1, Sec. 22. vs. Commonwealth, 69 Ky. 305, Sco. 228. Dugger vs. Wright, 51 Ark. 232, Sec. 219, 263. Duker vs. Franz, 7 Bush (Ky.) 273, Sec. 73. Dun vs. Garrett, 93 Tenn. 6i50, Sec. 109. Dunn vs. Parsons, 40 Hun 77, Sec. 98. vs. Slee, HoH N. P. 399i, See. 88. TABLE OF CASES. 549 (References are to sections.) IhiBn vs. Sparks, 1 Ind. 307', Sec. .2177. Dunlap vs. Eden, 15 Ind. App. 575, Sec. 125. ye>. Foster, 7 Al'a. 734, Sec. 263. vs. WiUett, 153 N. C. 3117, Sec. 23. Duncan vs'. North & South Wales Bank, 6 Appeal Cases 1, Sec. 244. Dung vs. Parker, 52 N. Y. 496, Sec. 25. Dunterraan vs. Storey, 40 Neb. 447, Sec. 190. Dupee vs. Blake, 148 III. 453, Sec. 92. Durbin vs. Kuney, 19 Ore. 71, Sec. 269. Durein vs. State, 38 Kan. 4851, Sec. 231. Durnherr vs. Ran, 185 N. Y. 2'1I9, Sec. IM. Durham vs. Craig, 79 Ind. 117, Sec: 255. Dussol vs. Bruguieire, 50 Cal. 45©, Sec. 275. Dusitin vs. Hodgen, 47 III. 125, Sec. 50. Dwelley vs. Dwelley, MS Mass. 509, Sec. 128. Dwenger vs. Geary, 113 Ind. 106, Sec. 128. Dye vs. Dye, 31 0. S. 8<3', Sec. 95. Dyer vs^. Gibsom, 1© Wis. 567, Sec. 42. E Earle vs. Earle, 4l9 N. Y. Super. Ct. 57, Sec. 181. East Bridgewater Sav. Bank vs. Bates, 191 Mass. 110, Sec. 68. Easter vs. WMte, 12 0. S. 2'li9, Sec. 34. Easterly vs. Barber, 66 N. Y. 433, Sec. 278. Eastern Eailroad Co. vs. Laring, 138 Mass. 381, Sec. 183, Eastman vs. Curtis, 4 Vt. CIC, Sec. 147. vs. Foster, 8 Met. Ii9, Sec. 25S. Eastwood vs. Kenyon, U Ad. & Ell. 43S, Sec. 31. Eaton vs. Littlcfieia, 147 Mass. 122', Sec. 138. vs. Mayo, 118 Mass. 141', Sec. 58. vs. Waite, 49 N. Y. 57, Sec. 181. Eberbardt vs. Wood, 2 Tenn. Ch. 488, Sec. 277. Ecker vs. Bohn, 45 Md. 278, Sec. 45. Eddy vs. Davidson, 42 Vt. 56, Sec. 37. vs. Moore, 23 Kan. W8', Sec. 201. vs. Sturgeon, 15 Mo. IW, Sec. 96. Edgerly vs'. Emerson, 33 N. H. 565, Sec. 249. vs. Lawson, 176 Mass. 551, Sec. 51. Edmonds vs. Sheahan, 47 Tex. 443, Sec. 271. Edmonson vs. Potts' Adrar., Ill Va. 79, Sec. 116. Edmonston vs. Drake, 5 Pet. 684, Sec. 66. Edmunds vs. Harper, SI Gratt. (Va.) 6.37, See. 117. Edwards vs'. Bodine, 11 Paige 223, Sec. 197. vs'. Coleman, 6' T. B. Mon. (Ky) 567, See. 81, 94i. vs. Edwards, 3a Til. 474, Sec. 1B6. vs. Pomeroy, 8 Cal. 254, Sec. 201. vs. United States, 103 TJ. S. 471, Sec. 145. 550, TABLE OF CASES. (References are to sections.) Edwards Co. vs. Goldstein, 80 0. S. 303, Sec. 202. Egbert vs. Hanstm, TO N. Y. S. 388, Sec. 273. Egremont vs. Benjamin, 125 Mass. 15, Sec. 1'60. Eilbert vs. Finkbeiner, 66 Pa. St. 243, Sec. 8, I'O. Eilistedn vs. Marshall', 58 Ala. 15'3, Sec. 58. Elder vs. Kutmer, 97 Cal. 490, Sec. 200, 204. Electric AppKance Co. vs. TJ. S. Fidelity & Guar. Co., 110 WU. 434, See. 126, IKl, 243. Elizalde vs. Murphy, 163 Cal. 681, Sec. 218, 222. Elkin vs. People, 4 Illl. 207, Sec. 157. Ellicott vs. M^arford, 4 Md. 85, Sec. 227. Ellesmere Brewing Co. vs. Cooper, 1 Q. B. L. R. 75, Sec. 263. Ellis vs. Felt, 206 Mass. 472, Sec. 38. vs. Johnson, 83 Wis. 394, Sec. 217. vs. Jones, 70 Miss. 60, Sec. 6<). vs. Wilmoit, L. E. 10 Ex. 10, See. 100. Ellis, et al., vs. Johnson, 96 Ind. 383, Sec. 23'. Ellison vs. Wisehart, 20 Tnd. 32, Sec. 38. Elliot* vs. Black, 45 Mo. 372, See. 2)12. vs. Brady, 192 N. Y. 221, Sec. 117. vs, Giese, 7 Harr. & J. 467, Sec. 27. vs. Jenness, 111 Mass. 29', Sec. 45. Ellsworth vs. Harmon, 101 111. 274, Sec. 51. Ellwell vs. Seattle Scandinavian Fish Co., 2 Alaska 617, Sec. 202. EUwood Mfg. Co. vs. Rankin, 70 Iowa 403, Sec. 197. Ellyson vs. Lord, 124 Iowa 125, Sec. 137. EKrod vs. Gastineau, 124' Ky. 609, Sec. 274. Emerine vs. O'Brien, 36 0. S. 4'9il, See. 97. Emerson vs. Slater, 22 How. (U. S.) 28, Sec. 30.. Emerson Mfg. Co. vs. Rustad, 120 N. W. 1004, Sec. 66. Emery vs. Baltz, 94 N. Y. 408, Sec. 71. vs. Burbank, 163 Mass. 326i, Sec. 47. Emmitt vs. Brophy, 42 0. S. 82, Sec. 142. Empire Staite Surety Co. vs. Carroll County, 194 Fed. 593, Sec. 23ia, 1^2, 149. V8'. Lindeiiniei-er, 54 Colo. 407, Sec. 70. Engler vs. People's Fire Ins. Co., 46 Md. 322, Sec. 123, 130. English vs. Darley, 2 Bos. & Piil. 61, Sec. 100. vs. Landon, 181 m. 614, Sec. 83. vs. Siebert, 49 Mo. App. 508', Sec. 114. Ennis vs. Waller, 3 Black. (Ind.) 472. Sec. 22. EnoB vsi. Anders'on, 40 Colo. 395, Sec. 31. Enright vs. Falvey, L. R. 4 Ir. 307, See. 107. Ensley vs. HoUingsworth, 170 Alt. 396, Sec. 45'. Enterprise Hotel Cto. vd. Book, 48 Oreg. 58, Sec. 76a. Epenbaugh vs. Gooch, 15. Ky. L. Rep. 576, See. 196. Equitable Surety Co. vs. Hazen, 121 Ark. 630, Sec. 76a. vs. U. S'., 234 U. IS. 44S, Stec. 131. Erfurth vs. iStevenaon, 71 Ark. 199, Sec. 76a. Erie Co. Sav. Bank vs. Coit, 104 N. Y. 532, Sec. 57. Ernst Bros. vs. Hogue, 86 Ala. 502, (Stec. 213. TABLE OF CASES. 551 (References are to sections.) Erwin vs. Downs, 15 N. Y. 575, Sec. 104. EsMeman vs. Bolenius, 114 Pa. 269, Sec. 268. Estate of Ramsey vs. Whitbeck, 1!83 111. 550, Stec. 16, 138. Estey vs. Harmon, 40 Mich. 645, Sec. 213. Ettlinger vs. National Surety Co., 221 N. Y. 467, Sec. 15. Eureka iStone Co. vs. First Christian Church, 86 Ark. 212, Sec. 76b, 82. Evans vs. Bell, 45 Tex. 553, Sec. 62. vs. Brembridge, 8 DeG. M. & G. 100, Sec. 111. vs. Comm, 8 Watts (Pa.) 398, See. 177. vs. Daughtry, 84 Ala. 68, See. 109. vs. Graden, 125 Mo. 72, Sec. 73, 79. vs. Hoare, L. R. 1 Q. B. 503, Stec. 30. vs. Illinois Surety Co., 298 111. 101, Sec. 119. VS'. Hoare, L. R. 1 Q. B. 303, Sec. 30. vs. Keeland, 9 Ala. 42, Sec. 16, 105: vs. Lawton, 34 Fed. Rep. 2313, Sec. 76. vs. McCormick, 167 Pa. 247, Sec. 66. vs. Populus, 2 La. Ann. 121, Sec. 145. vs. State Bank, 13 Ala. 787, Sec. 174. vs. Taylor, 60 Tex. 422, See. 217. Evansville Nat. Bank vs>. Kaufman, 93 N. Y. 278, Sec. 52. Evarta vs. Steger, 6 Ore. 55, Sec. 121. Everson vs. Gere, 122' N. Y. 290, See. 91. Ewan vs. Brooks, Waterfield Co., SR 0. S. o&6. Sec. 8, 10. Excelteior Needle Co. vs. Smith, 6il Conn. 56, Sec. 49. Exchange Bank vs. McDill, 56 S. C. 565, Sec. 96. vs. McMillan, 7fi S. C. 561, Sec. 98. Executors of White, 30 Vt. 338i Sec. 279. Expanded Metal Co. vs. Bradford, 177 Fed. 604, See. 188. Ex Parte Banks, 185 Ala. 27'5., Sec. 46. Bisihop, 15 Ch. Div. 400, Sec. 271. Garland, 4 Wall. 333, Sec. 145. Gifford, 6 Ves. 805, Sec. ]i02, 114. Harris, oE Ala. 87-, Sec. 1*48. Henderson, 6 Fla. 27«, Sec. 180. Jacobs, L. R. 10 Ch. 31iL, Sec. 100. Kerwin, 8 Cow. 118, Sec. 20. Smith, 3' Bro. C. C. 1, Sec. 102. Snowden, In re, 17 Gh. Div. 44, Sec. 269. Waring, et al., 2 Glyn & Jameson 404, Sec. 256. Yates, 2 DeG. & J. 191, Sec. 75. Eyre vs. Hollier, Lloyd & Gould 250, Sec. 73. Eyster's Appeal, 4 Harris 372, Sec. liS6. Ezzard vs. Bell, 100 Ga. 150, Sec. 249. F Fahnestock vs. Gilham, 77 111. 637, Sec. 211. Fahnestock's Appeal, 1'04 Pa. 46, Sec. 166. Fain vs. Turner, 96 Ky. 634, Sec. 42. Fair vs. Pengelly, 34 Up. Can. (Q. B.) 611, See. 82. Faires vs. Cockerell, 88 Tex. 428, IStec. 276. vs. Lodanc, 10 Ala. 50, Sfec. 36. 552 TABLE OP CASES. f (References are to sections.) Fail-child vs. HodgeSi 14 Wash. 117, Sec. 1«6. vs. Keith, 29 0. S. 150, Sec. Vm. vs. Northeastern Mutt Life Assn., 5'1 Vt. 613, Sec. 142. Faleonei- vs. Shores, 37 Ark. 3S6, Sec. 150. Fales vs. McDonald, 32 K. I. 400, Sec. 275'. FaU; River Nat. Bank vs. Slade, 133 Mass. 413, Sec. ITS. Fanibro vs. Keith, 122 S. W. 40, Sec. S3. Famulener vs. Anderson, IS 0. S. 4»/3, Sec. 20i, 109. Panning vs. Murphy, 126 Wis. 536, Sec. 81, 83, 90. Farebrother vs. Simmons, 5 Bar. & Aid. 333, Sec. 22.. vs. Wodehouse, 213 Beav. I'S, Sec. 250. Faa-mers Bank vs. Braden, 145 Pa. 473, Sec. 108. vs. Hunt, 1124 N. C. 171, See. 23a. vs. Raynolds, 13 0. 85, Sec. 99. vs. Teeters, 31 0. S. 36, Sec. 274. Farmers Loan & Trust Co. vs. Lord, 41 Okl. 569, Sec. IBS. Farmers & Traders Bank to. Fidelity & Dep. Co., 22 Ky. L. Rep. 22, Sec. 248 vs. Harrison, 57 Mo. 503, Sec. 83. Farmington vb. Hobart, 74 Me. 416, Sec. 142. vs. Stanley, 60 Me, 472, Sec. 106, 162. Farrar vs. Kramer, 5' Mo. App. 187, Sec. 76'. Farris vs. Mathews, 149 Ky. 4551, Sec. 203. Farrow vs. Rcspess, 11 Irod. Law (N. C.) 170, Sec. ei, 67. Farwell vs. Smith, 12 Pick. 83, Sec. 60. Fassbender vs. Amer. Sur. Co., 122 N. Y. S. 442; Sec. 220. Fassnacht vs.. Emsing Gagen Co., 18 Ind. App. 80, Sec. 106. Faulkner vs. Faulkner, 73 Mo. 327, Sec. 132. Faurot vs. Gates, 86 Wis. 568, Sec. 273. Fawcett vs. Freshwater, 31 0. S. 637, Sec. 83. Fawcetts vs. Kimmey, 38 Ala. 261', Sec. 247. Pafwkner vs. Baden, 89 Ind. 5S7, Sec. 210. Fay vs. Edmiston^ 25' Kan. 430, Sec. 176. vs. Richardson, 7 Pick, ftl. Sec. If23. vs. Tower, 58' Wis. 280, Sec. 94. Feamsiter vs. Withrow, 12 W. Va. Oil, Sec. 282. Fearons vs. Wright, 6 Ky. L. Rep. 747, Sec. 184. Feathersitone vsi. Hendrick, 5® HI. App. 497, See. 57. Federal Union Surety Co. vs. Maguire, 111 Ark. 373, (Sec. 233. Feemster vs. Anderson, 6 T. B. Hon. (Ky.) 537, Stec. 185. Fegley vs. Jennings, 44 Fla. 203, Stec. 61. Fehlinger vs.- Wood, 134 Pa. 517, Sec. 40. Feigert vs. State, 31 0. iS. 432, Sec. 163, 172. Felton vs. Bissell, 25 Minn. 15, Sec. 280. Fennell vs. McGowan, 58 Miss. 261, iStec. 99. vs. McGuire, 21 Up. Can. (C. P.) 134, Sec. 59, 71. Fenter vs. Obaugh, 17 Ark. 71, Stec. 105. Fergus Falls vs. Illinois iSurety Co., 112 Minn. 462, Sec. 76a. Ferguson vs. Glidwell, 48 Ark. 196, Stec. 202. vs. Kinnoull, 9 CI. & Fin. 251, .Stec. 169. . vs. Turner, 7 Mo. 497, Sec. 99. TABLE OP CASES. 553 (References are to sections.) Ferrell vs. Maxwell, 28 0. S. 383, Sec. 34, Wi5. vS. Milliean, 156' S. W. 230, Sec, 32. Ferrer vs. Barrett, 4 Jomes Eq. (N. C.) 455. See. 270. Ferry vs. BurchajrdB, 21 CJonn. 597', See. 149. Fer*i'g vs. Bucher, 3 Pa. 308, See. 111. Fessenden vs. iSummers, 62 CaJ. 4S&, See. 8, 10. Fefcrow vs. Wiseman, 40 Ind. 148, Sec. 11. Fewlaas vB. Keeshian, 88 Fed. Bep. 673. See. 71, 119. Fidelity Mutual Life Ins. Assn. vs. Dewey, 83 Minn. 386, Sec. 70, IW. Fidelity & Casualty Co. vs. Grays, 76 Minn. 450, Sec. 242. vs. Eiciihoff, 63 Minn. 170, Sec. 242. V9. Gate City Nat. Bank, 97 Ga. 634, Sec. 240. vs. Lawler, 64 Minn. 144, Sec. 34. Fidelity & Deposit Co. vs. Agnew, 152 Fed. 950, See. 76b. ' vs. Aultman, -58 Fla. 228, Seic. 144. vs. Buckley, 75 N. TI. 506, Sec. 279. vs. Butler, 180 Ga. 225, Sec. 243a. vs. Colvin & Jackson, S3 Mo. App. 2.04, Sec. 130. vs. Commonwealth, J 04 Ky. 570, Sec. 165'. vs. Mosliier, 151 Fed. 800, Sec. 106. vs. Phillips, 84 Atl. 432, Sec. 263. vs. Robertson, I'SO Ala. 379, Sec. 7«a, 70b. vs. Singer, 50 Atl. Rep. 51S, Sec. 243. vs. Sousley, 151 S. W. 3S3, Sec. 249. Fidelity & Guaranty Co. vs. We»tem Bank, 29 Ky. L. R. 63», Sec. 240. Fidler vs. Hersbey, 90 Pa. 363i, Sec. 116. Field vs. Holland, 6 Cranch », Sec. 118. Fielding vs. Waterhouse, 8 Jones & Spen. 424, Sec. 98. Files vs. Reynolds, 6« Ark. 314, Sec. 143. Finch vs. State, 71 Tex. 52, Sec. 158. Findlay vs. Hosmer, 2 Conn. 350, Sec. 252. Findley vs. Ifill, 8 Ore. 247, Sec. 84. Finnell vs. Jas. H. Goodman Co. Bank, 156 Cal. 18', Sec. 246. Finney vs. Condon, 86 111. 80, Sec. 76b. Finnucan vs. Feigenspan, 81 Conn. 378, Sec. 49, 60. Fiola vs. Ainsworth, 63 Neb. 1, Sec. 123. Fire Assn. of Phila. vs. Ruby, 49 Neb. 5S4, Sec. 176. Kre, etc.. Assurance Co. vs. Thompson, 68 Cal. 208, Sec. 106. Fireman's lbs. Co. vs. Wilkinson, 35 N. J. Eq. 1'60, Sec. S& Firmian vs Elood, 2 Kans. 4fl'6, Sec. 8. First Commercial Bank vs. ValetntSne, 209 N. Y. 145, Sec. 215. First Congregation Church of Christ in Corona vs. Lowery, 175 Cal. 124, *c. 238. First Mass. Turnpike Co. vs. Feld, 3 Mass. 201, Sec. 141. First M. E. Church vs. laenberg, 246 Pa. St. 221, Sec. 131. First Nat. Bank vs. Babcock, 94 Cal. 96, .Slec. 67. vs. Carpenter, 41 Iowa 518, Sec. 65. vs. Chalmers, 144 N. Y. 432, Stec. 43. vs. Cheney, 114 Ala. 536, iSec. 90. vs. Fidelity & Dep. Co., 145 Ala. 335, See. 76b. vs. Finck, 100 Wis. 446, Stec. 23. 554 TABLE OF CASES. (References are to sections.) First Nat. Bank vs. Fiske, 133 Pa. 241, Sec. 49. vs. Gaines, 87 Ky. 597, iSeo. 112. vs. HomeBly, 99 N. C. 531, iSlec. 115. VB. Houtzer, 96 0. iS. 404, Sec. 49, 50. vs. JohnBOn, 138 Mich. 700, Sec. 15. vs. Kittle, 69 W. Va. 171, Sec. 99. vs. Lineberger, 86 N. C. 4'o4, Sec. 82. vs. Marshall, 73 Me. 79, Sec. 10. vs. Mattingly, 92 Ky. 650, Sec. 15-. vs. Payne, 111 Mo. 291, Sec. 8. vs. Powell, 149 S. W. 1096., Sec. 99, 101. vs. Rogers, 13 Minn. 407, Sec. 387. vs. Samuelson, 82 Neb. 532, Sec. 129. vs. Schreiner, 110 Pa. 188, Sec. 101. vs'. Taylor, 3S Utah 516, Sec. 15. vs. Wlheeler, 12 Tex. Civ. App. 489, Sec. 255. vs. Wood, 71 N. Y. 405, Sec. 116'. Firs.t Presbyterian Church vs. Housel, 11& 111. App. 230, Sec. 76b. First State Bank vs. Stevens Land Co., 119 Minn. 209, Sec. 181', 186. Fish vs. Glover, 154 111. 8.61, Sec. 115.. Fishback vs: Weaver, 34 Ark. 569, Sec. 253. Fishbum vs'. Jones, 37 Ind. 119, Sec. 106, 127. Fisher vs. Columbia Bldg. & Loan Assn., 59 Mo. App. 430, Sec. 245. vs. Spillman, 85 Kan. 552', Sec. 90. Fisk & Co. vs. Eickel, 108 Iowa 370, Sec. 48. Fitcher vs. Griffiths, 103 N. E. 471, Sec. 251. Fitzgerald vs. Staples, 88 111. 234, Sec. 20, 131. Fitzgerald Spear Co. vs. Kelly, 81 N. J. L. 6, Sec. 36. Fitzpatrick vs. Todd, 79' Ky. 52'4, Sec. 188. Fitzpatrick's Admr. vs. Hill, 9 Ala. 783, Sec. 254. Fixel vs. Tallman, 116 N. Y. S. 639, Sec. 208. Flainnagan vs'. Cleveland, 44 Neb. 58', Sec. 184, 186, 190. Flannigan vs. Erwin, 173 111. App. 452, Sec. 212. Fleming vs. Barden, 126 N. C. 450, See. S3. vs. Odum, 59 Ga. 360, Sec. 100. Flentham vs. Steward, 45 Neb. 640, Sec. 67. Fletcher vs. Austin, 11 Vt. 447, Sec. 74. VS'. Menken, 37 Ark. 206, Sec. 2S4. Floumoy vs. JefFersonyille, 17 Ind. 169, Sec. 1169. Floyd vs. Anderson, 5- Okl. Cr. 65, Sec. 200. vs. Hamilton', 33 Ala. 235, Sec. '20Sl Foerderer vs'. Moors, 91 F. 476, Sec. 98. Fogel vs. Dussault, 14J Mass. 1S4, Sec. 181. Fogg Co. vs. Baitletb, 75 Atl. 3S0, Sec. 82. Follansbee vs. Johnson, 28 Minn. 311, Sec. 142. Folsom vs. Carli, 5 Minn. 333., Sec. 249. Folz VS'. Tradesman's Trust & Sav. Fund Co., 201 Pa. 583, Sec. 70. Fond-du-Lac Harrow Co. vs. Bowles, 54 Wis. 425, Sec. 76. vs.. Haskins, 51 Wis. 136, Sec. 69. TABLE OP CASES. 555 (References are to sections.) Foo Long vs. American Surety Co., 146 N. Y. 251, Sec. 186. Forburger Stone Co. vs. Lion Bonding Siurety Co., 103 Neb. 202, Sec 131. Forbes vs. Jackson, 19 Ch. D. 615, iStec. 244, 250. • vs. Keyes, 193 Mass. 38, iSec. 222. vs. McHugh, 152 Mass. 412, Sec. 217. Ford vs. Beard, 31 Mo. 459, ISec. 82. vs. Beech, 11 Q. B. 852, Sec. 93. vs. Loomis, 62 Iowa, 586, iSec. 197. vs. McLain, 164 Mo. App. 174, Sec. 16. Foreman vs. People, 209 111. 567, ISec. 145. Forest County vs. United Surety Co., 149 Wis. 323, Sec. 164. Forniquet vs. Tegarden, 24 Miss. 96, Sec. 139. Forst vs. Leonard, 112 Ala. 296, Sec. 125. Fosmire vs. National iSurety Co., 229 N. Y. 44 Sec. 131. vs. Eyan, 104 Mich. 625, gee. 110. Foster vs. Barney, 3 Vit. 60, Sec. 68. vs. Clark, 19 Pick. 320, Sec. 13». vs. Commonwealth, 36 Pa. 148, Sec. 2231. vs. Davis, 46 Mo. 268, Sec. 166. vs. Epps, 27 111. App. 235, Sec. 188. vs. Hooper, 2 Mass. 572, Sec. VV9. vs. Metts', 55 Miss. 77, Sec. 170. vs. Trustees of Athenaeum, 3 Ala. 302, Sec. 249. Foster, Admx., vs. Wise, Admr., 46 0. S. 20, Sec. 2a8. Fountain vs. Bigham, 235 Pa.. 35, Sec. 14. Fourth Nat. Bank vs. Mayer, 06 Ga. 728, Sec. 208. vs. Spinney, 47 Hun 293, Sec. 126, 132. Fowler vs. Alexander, 1 Heisk. (Tenn.) 42'5, Sec. 112. vs. Allen, 32 S. C. 229, Sec. 74. vs. Brooks, 13 N. H. 240, Sec. 94. vs. Gordon, 5 Ky. L. Rep. 332, Sec. 187. Fowler Nat. Bank vs. Brown, 19' Ind. App. 433, Sec. 58. Frahm vs. Walton, 180 Cal. 396', See. 183. Frank vs; Edwards, 8 Wels.b. H. & G. 214, Sec. 132. Frankel vs. Stern, 44 Cal. 1S8, Sec. 208. Franklin Ave. Sav. Institute vs. Board of Education, 75 Mo. 408, Sec. 128. Franklin Bank vs. Cooper, 36 Me. 179, Sec. 15, 137. vs. Stevens-, 39 Me. 532, Sec. 15, 106. Fransioli vs. Thompson, 55 Wash. 259', Sec. 76a. Fraser vs. Little, 13 Mich. 196, Sec. 214. Fray vs. Blackburn, 3 Best & Sm. 576, Sec. 16». Frazer vs. Jordan, 8 El. & Bl. 303, Sec. 03. Freaner vs. Yingling, .37 Md. 491, Sec. 98. Fredericks vs. Board of Health of Hoboken, 82 N. J. L. 200, Sec. 145. Freeholders vs. Wilson, 16 N. J. L. 110, Sec. 166. Freeland vs. Compton, 30 Miss. 424, Sec. 84. Freeman vs. Davis, 7 Mass. 200, Sec. 210. Frelinghuysen vs. Baldwin, IB Fed. Rep. 452, Sec. 107. French vs. Bates., 149 Mass. 73, See. 70. vs. Hicks, 52 Tex. Civ. App. 427, Sec. 23a.. vs. Mars'h, 29. Wis. G49, Sec. 63. vs. Eyan, 104 Mich. 625, Sec. 110. Frew vs. iScoular, 101 Neb. 131, Sec. 273. 536 TABLE OF CASES. (References are to sections.) Fiiberg vs. Donovan, 23 111. App. 58, Sec. 246, 263. Friedlander vs. N. Y. Plate Glass' Co., 56 N. Y. S. 583, S«c. 52. Friedline vs. State, S3 Ind. 366, Sec. 231. Friedman vs. Lemle, 38 La. Ann. 664, Sec. 188. Friend vs. Smith Gin Co., 59 Ark. 86, Sec. 98. FrieDdly vs. Elwert, 57 Ore. 509, Sec. 28. vs. National Surety Co., 46 Wash. 71, Sec. 78. Frink vs. Peabody, 26 111. App. 390, Sec. 274. vs. Southern Exprests Co., 82 Ga. 33, Sec. 130, 137. Frohardt Bros. vs. Duff, ISG Iowa 144, See. 39. Froude vs-. Bishop, 49 N. Y. S. 955, Sec. 83. Frost vs. Jord, 37 Minn. 544, Sec. 208. vs. Standard Metal Co., 215 111. 240, Sec. 60, 66. Frownfelter vs. State, 66 Md. 80, Sec. 156. Fry vs. Bannon Sewer Pipe Co., 101 N. E. 10, Sec. 75. Fulkerson vs. Brownlee, 69 Mo. 371, Sec. 248. Fullam vs. Adams', 37 Vt. 39'1, Sec. 40. Fuller VS'. Aylesworth, 75 Fed. Rep. 694, Sec. 187. vs. Davis, 1 Gray 612, Sec. 104, 232. vs. Dupont, 1S3 Mass. 506, Sec. 109. vs. Hapgood, 39 V't. 617, Sec. 263, 274. vs. Scott, 8 Kan. 2S, Sec. 16, 67. vs. Tomlinson, 58 Iowa 111, See. 9Q. Fiillerton vs. Hill, 48 Kan. 558, Sec. 8, 10, 112. vs. Sturges, 4 0. S. 529, Sec. 109. Fullerton Lumber Co. vs. Gates, 89 Mo. App. 201, Sec. 7e«. vs. Snouffer, 139 Iowa 176, iStec. 8. Furness vs. Read, 63 Md. 1, Stec. 202. Furniold vs. Bank, 44 Mo-. 336, Sec 249. Fusz vs. Trager, 39 La. Ann. 292, iStee. 205. 6 Gadsden vs. Brown, Speer's Eq. ('S. C.) 27, iSec. 259, Gaff vs. ISims, 45 Ind. 262, 'Sec. 68. Gage vs. Lewis, 68 111. 604, Sec. 110, 281. vs. Mechanic's Nat. Bank, 79 111. 62, iSec. 61. Galbraith vs. Fullerton, 53 111. 126, Sec. 83. Gallager vs. Bruniel, 6 Cowen 346, Sec. 110. Gallagher vs. McBride, 66 N. J. L. 360, See. 36. Gamage vs. Hutchins, 23 Me. 565, .Sec. 66, 67. Gamble-Robinson Co. vs. Mass. Bonding & Ins. Co., 113 Minn. 38, Sec. 235. Gammell vs. Parramore, 58 Ga. 54, Sec. 70. Gandy vs. Gandy, L. R. 30 Ch. Div. 57, Sec. 142. Ganey vs. Hohlman, 145 111. App. 467, ,Sec. 79. Gannett vs. Blodgett, 39 N. H. 150, iSec. 245. Gans vs. Cartfer & Aiken, 77 Md. 1, Sec. 13. vs. Thieme, 93 N. Y. 225, Sec. 259, 271. Gard vs. iStevens, 12 Mich., 292, iStec. 18, 59, 96. TABLE OF C^iSE8. 557 (References are to sections.) Gardner v». Brown, 23 Nev. H56, Sec. 214. vs. Cooper, 9 Kan. App. 5&7, See. 122. vs. Walsh, a El. & Bl. S3, Sec. 75. vs. Watson, 76 Tex. 25, Sec. 50, 73. Gardener vs. Woodyear, 1 Ohio 170, 177, See. 181. Garland vs. Gaines, 73 Conn. 602, Sec. 57, 61. Garlini vs. Strickland, 27 Me. 443, Sec. 209. Garlinghouse vs-. Jacobs, 29' N. Y. 297, Sec. 172. Garner vs. Hudgins, 46 Mo. 399, Sec. 34, 39, 279. Garnett vs. Farmers' Nat. Bank, 9'1 Ky. 014, Sec 138. Garrett vs. Logan, 19 Ala. 344, Sec. 197. TO. Shove, 15' R. I. 538', Sec. 121. Garver vs. Tisinger, 46 O. S. 56, See. 227. Garvin vs. Garvin, 27 19. C. 472, See. 249. Gaskill vs. Wales, 36 N. J. Eq. ^T, Sec. 244. Gasquet vs. Oakey, 19 La. 76, Sec. 28'4. Gatchell v®. Morse, SI Me. 205', Sec. 128'. Gates vs. Bell, 3 La. Ann. 62, Sec. 22. vs. McKee, 13 N. Y. 232, Sec. 18, 50, 60. vs. Tebbetts, 83 Neb. 573, Sec. lia, 104. Gaussen vs-. United States, 97 U. S. 584, Sec. 152. Gay VS'. Grant, 101 N. C. 206i, Sec. 218. vs. Mott, 43 Ga. 252, Sec. 16. vs. Murphy, 134 Mo. 98, Sec. 123. vs. Parpart, 101 U. S. 391, Sec. 181. VS'. Schaefer, 52 Wash. 269, Sec. 43. vs. W'ard, 67 Conn. 147, Sec. 71, 119. Gaylor vs. Hunt, 23 0. S. 255, Sec. 169. George va. Andrews, 60 Md. 26, Sec. 90. vs.. Bischoff, 6» 111. 236, Sec. 188'. VS'. Crim, 66 S. E. 526, Sec. 249. vs. Elms, 46 Ark. 260, Sec. 221. VB. Hoskins, 30 S. W. Rep. (Ky.) 400, Sec. 34. • Gerard vs. Co'Wpert'hwait, 2a- N. Y. S. 1092, Sec. 135. Gerber vs'. Acldey, .32 Wis. 233', Sec. 164. vs. Sharp, 72 Ind. 55S, Sec. 249. German Amei-. Sav. Bank vs. Fritz, 68 Wis. 390, Sec. 249, 1253. German American Bank vs. Auth, 87 Pa. 419, Sec. 130. German National Bank vs. Foreman, 138 Pa. 474, Sec. 101. ■ German Savings Inat. vs. Vahle, 28 111. App. 557, Sec. 86. Germanie Fire Ins. Co. vs. Hawks, 56 Ga. 674, Sec. 143. vs'. Lange, 193 Mass. 67, Sec. 76. Cietty VS'. Binsse, 49 N. Y. 385, Sec. 60, 119. Ghiselin vs. Ferguson, 4 Har. & J. (Md.) 522, Sec. 248. Gibbens vs. Pickett, 31 Fla. 147, See. 147. Gibbs vs. Blanchard, IB Mich. 29'3, Sec. 37. vs. Johnson, 63 Mich. 671, Sec. 109, 199. Gibson vs. Mitchell, 16 Fla. 519, Sec. 273. vs. Rix, 32 Vt. 824, Sec. 1-10. vs. Shehan, 5 App. D. C. 3P1, Soc. 2C3. 558 TABLE OF CASES. (References are to sections.) Gieseke vsi. Johnson, 115 liid. SOS, Sec. 284. Gifford vs. Rising, 12 N. Y. Supp. 430, See. 24&. Gilbert vs. Neely, 36 Ark. 24, Sec. 248. Giles vs: Brown, Admr., SO Ga. 65*, Sec. 220. Gilkey vs. Oook, 60 Wis. 1S3, Sec. 147. Gill vs. Morris, 11 Heisk. 614, Sec. 103. Gillespie vs. Torrance, 25 N". Y. SOC, Sec. 117. Gillett vs. Wiley, 1S6 HI. 310, Sec. 225. Gillighan vs. Boardman, 2& Me. 79, Sec. 27. Gillilan vs. Ludingion, 6 W. Va. 128, Sec. 115. Gilmore vs. Crowell, C7 Barb. 62, See. 206. Gilpin vs. Hord, 85 Ky. 213', Sec. 185, 188. vs. Marley, 4 Hotist. (Del.) 284, Sec. 8, 10, Gingrich vs. People, 34 111. 448', Sec. 2132. Glasgow vs. State, 41 Kan. 338, Sec. 232. Glass vs. Thompson, 9 B. Mon. (Ky.) 235, Sec. 97. Glasscock vs. Hamilton, 62 Tex. 143, Sec. 114, 269, 275. Glazier vs. DougLaes, 32 Conn. 39'3, See. 101. Gleason vs. Briggs, 28' Vt. 135, Sec. 36. Gleeson's Esta'te, 192' Pa. 279, Sec. 183, 188. Glencoe vs. People, 78 HI. 382, Sec. 147. Glenn vs. Jon.es, 146 Cal. 516, Sec. 76b. vs'. Morgan, 23 W. Va. 467, Sec. 83. Globe Bank vs. Small, 25 Me. 366, Sec. 67. Godfrey vs. Orisler, 121 Inid. 203, Sec. 97. vs'. Rice, 59 Me. 308, Sec. 275, 284. Godwin vs. Francis, L. R. 5, C. P. 296', Sec. 30. Goebel vs. Stevenson, 35' Mich. 172, Sec. 205'. Goetz vs. Foos, 14 Minn. 265, See. 3'1. Goflf vs. Bajikston, 35 Miss. 519, Sec. 11. Gold vs. Bailey, 44 111. 491, Sec. 234. Goldring vs. Thompson, 58 Fla. 248, Sec. 58. Golsen vs. Brand, 75 111. 148, Sec. 275, 280. Good vs. Martin, (>5 V. S. 90, Sec. 8, 10, 12i. vs. Martin, 1 Colo. 16oi, Sec. 10. Goodall vs. Wentworth, 20 Me. 322, Sec. 369. Goodbar vs. Lindsley, 51 Ark. 380, Sec. 208. Goodling vs'. Simon, 54 Pa. Sup. Ct. 125, Sec. 39. Goodman vs. Chase, 1 Barn. & Aid. 297, Sec. 38. Good Roads Machinery Co. vs. Moore, 25 Ind. App. 479, See. 76. Goodrich vs. Tracy, 43 Vt. 314, Sec. 97. Goodwin vs. Blake, 3 T. B. Mon. (Ky.) 106, Sec. 1S8. Goodwine vs'. State, 81 Ind. 1109, Sec. 166. Goodwyn vs. Hightower, 30 Ga. 249, Sec. 82. Goodyear Dental Vulcanite Co. vs. Bacon, 15'1 Mass. 460, Sec. 23a, 12B. Gordon vs. Moore, 44 Ark. 349, Sec. 114. vs. Price, 10 Ired. 385, Sec. So. vs. Rixley, 86 Va. 86®, Sec. 269. TABLE OF CASES. 559 (References are to sections.) _ Gosman vs. Cmger, B9 N. Y. 87, Sec. 11. Gosserand vs. Lacour, 8 La. Ann. 75', Sec. 88, 114. Gossin vs. Brown, 11 Pa. 527, Sec. 250. Gottfried Brewing Co. vs. McDonald, 146 111. App. 601, Sec. 144. Gould vs. Ellery, 39 Barb. li&3. Sec. 51. vs. Robson, 8 East. 570', Sec. 96. vs. Steyer, 75 Ind. 50, Sec. 220. Goux vs. Moucia, 30 La. Ann. "iiS. Sec. 223. Governor vs. Chxiteau, 1 Mo. 771, Sec. 220. vs'. Dodd, 81 III. 162, Sec. 159. vs. Gordan, 15 Ala. 72, Sec. 145. vs. Lagow, 43' 111. 134, Sec. Wl. vs. Monitfort, 23 N. C. 155, Sec. 175. vs. Pearce, 31 Ala. 4C5, See. 164. Grace vs. Mitchell, 31' Wis. 533, Sec. 172. Gradle vs. Hoffman, 105 111. 147, Sec. 147. Graeff's Appeal, 79 Pa. St. W6., Sec. 252. ■ Graff vs. Foster, 67 Mo. 512, Sec. 46. Graff & Co.'s Estate, 139 Pa. 69, Sec. 245. Grafton vs. Cummi'ngs, 99 U. S. 100, Sec. 29-. Graham vs. Bradley, 5 Humph. (Tenn.) 476, Sec. 63. vs. Marks," 98 Ga. 67, Sec. 14, 103. vs. Middleby, 185 Mass. 3-19, Sec. 68. vs. Rlngo., 67 Mo. 324, Sec. 117. vs. Ensh, 73 Iowa 451, Sec. 75. vs. State, 66 Ind. .380, Sec. 14C. Granite Bldg. Co. vs. Saville, 101 Va. 2'17, Sec. 233, 241. Grant vs. Ludlow, 8 0. S. 1, Seo. 25&. vs. Naylor, 4 Cranch 224, Sec. 52. vs'. Shaw, 16 Mass. 341, Sec. 42. vs. Smith, 46 N. Y. 9i3, Sec. 76. Graves vs. Lebanon Nat. Bank, JO Biish {Ky.i 23, Sec. 15, 106, 141; vs. Sittig, 5 Wis. 219, Sec. 209. Graves, et al., vs. Tucker, 10 Smedes &• M. 9, Sec. 16', 127. Gray vs. Farmers Bank, 81 Md. 631', Sec. 115'. vs. Herman, 75 Wis. 453, Sec. 41. vs. Mathias, 5 Ves. Jr. 286, Sec. 138. vs. Robinson, 33 Pac. Rep. (Ariz.) 712, Sec. 214. vs. Seckham, L. R. 7 Ch. App. 680, Sec. 252. vs. South & North Ala. R. R., 162 Ala. 262, Sec. 193. vs. State, 43 Ala. 4, Sec. 231. vs. The State, 78 Ind. 08, Sec. 19. Great Falls vs. Hanks, 21 Mont. 83, Sec. 151. Great Western Ptg. Co. vs. Belcher, 127 Mo. App. 133, Sec. «X. Greely vs. .Dow, 2 Met. 1T6> Sec. 93. Green va. Blunt, 59 Iowa 79, Ark. 229, Sec. 98. vs. Boyd, 13 Pa. Sup. Ct. 6SL, Sec. 76. VS'. Brookins, 23 Mich. 48, Sec. 32. 560 TABUE OP CASES. (References are to sections.) Green vs. Burke, 23 Waid. 490, iSfec. 114. vs. Conrad, 114 Mo. 651, Sec. 144. vs. Cresswell, 10 Ad. & Ell. 453, iSec. 32, 33. vs. Hadfield, 89 Wis. 138, Sec. 43. vs. Milbank, 56 How. Pr. 32, iStec. 275. vs. Richardson, 4 Colo. 584, Sec. 43. vs. 'Solomon, 80| Mich. 234, Sec. 38. vs. Young, 8 Me. 14, Sfec. 71. Greenberg vs. People, 225 111. 174, Sec. 164. Green Bay & Minn. R. R. Co. vs. Union Steamship Co., 107 U. S. 98, Sec. 11. Greene vs. Burton, 59 Vt. 423, iStec. 30. Greene County vs. Wilhite, 29 Mo. App. 459, Sec. 20, 109. Green Fruii) Co. vs. Pate, 99 Ga. 60, Sec. 208. Greenfield vs. Wilson, 13 Gray 384, Sec. 164. Greeniua vs. American 'Surety Co., 92 Wash. 401, Sec. 164. Greenlaw vs. Pettit, 87 Tenn. 467, See. 251. Greenough vs. ISmead, 3 0. S. 415, iSec. 8, 9, 112. Greenville vs. Ormand, 51 S. C. 58, iSec. 78. Greenwood vs. Taylor, 1 Russ. & M. 185, Sec. 252. Greer Machine Co. vs JSears, 23 Ky. Law. Rep. 2025, Sec. 66. Gregory vs. ILogan, 7 Blaekf. (Ind.) 112, Sec. 27. vs. O'Brian, 13 N. J. L. II, Slec. 184. Grey vs. Friar, 15 Q. B. 907, .Sec. 135. Grider vs. Tally, 77 Ala. 422, See. 169. Gridle'y vs. Capen, 72 111. 11, Sec. 48, 70. Grieff vs. Kirk, 17 La. Ann. 25, Sec. 185. Griffin vs. Hasty, 94 N. O. 438, iStec. 139. vs. Levee Comrs., 71 Miss. 767, Sec. 166. vs. Long, 131 a W. 672, Sec. 280. vs. Rembert, 2 Rich. N. S. (S. C.) 410,