United States Fidelity & Guaranty Co. v. Stark , 102 Ind. App. 222 ( 1936 )

This is an action brought by the appellee against appellant to recover on a bond executed by appellant to secure deposits made by appellee in the Peoples National Bank and Trust Company of Sullivan, Indiana, for losses occurring after the term of the bond. The issues were formed by an amended complaint in one paragraph, to which the appellant demurred and after such demurrer was overruled appellant filed an answer in general denial closing the issues. The cause was submitted to the court for trial without the intervention of a jury. All of the facts were stipulated. The court found for the appellee and entered judgment upon his finding in the sum of $3,272.20. Appellant seasonably filed a motion for new trial which was overruled and now prosecutes its appeal to this court assigning as error (1) that the court erred in overruling the appellant's motion to require appellee to make his amended complaint more specific, (2) the court erred in overruling appellant's motion to require appellee to state the facts to sustain the conclusions pleaded in appellee's amended complaint, (3) the court erred in overruling appellant's demurrer to appellee's amended complaint, and (4) the court erred in overruling appellant's motion for new trial.

The facts necessary to a decision of this case are as follows: The appellee as receiver of the First State Bank of Shelburn designated the Peoples National Bank and Trust Company of Sullivan, Indiana, as depository for the funds of such receivership. The said National Bank with appellant as surety executed a bond to the plaintiff in the penal sum of Twenty-five Thousand Dollars. The term of the bond began on the 18th day of January, 1929, and ended on the 18th day of January, 1930. The pertinent parts of the bond were as follows:

"Now, Therefore, the condition of this obligation is such that if the Principal shall during the term of this bond faithfully account for and pay on legal demand all moneys deposited with it by or on behalf of the said Obligee, and shall not suspend payment during the term hereof, this obligation shall be null and void, otherwise to remain in full force and effect. . . .

"SEVENTH. This obligation may be continued for any subsequent period by Continuation Certificate, signed and sealed by the Surety."

No funds were deposited by appellee until after the execution of this bond, but thereafter and up until January 18, 1930, the appellee deposited $27,127.33. No demand or refusal during this period is alleged or shown by the evidence. After January 18, 1930, appellee made no further deposits to his account except interest accumulations of $2,120.15. On the 27th day of June, 1932, the principal became insolvent and closed its doors and at that time the appellee had on deposit the sum of $5,342.35, all of which had been deposited between February 7, 1929, and January 18, 1930, except the sum of $2,120.15 of interest credited to the account. After the closing of the bank in June, 1932, demand was made on the National Bank for payment, which was refused, and notice then served on appellant, which also refused payment. None of said sum of $5,342.35 had been paid to appellee by the National Bank or its receiver or any other person at the time of trial.

The sole question presented to this court by the assignment of error is the liability of the appellant under the bond for loss of money on deposit during the term of the bond, although the loss occurred more than two years and five months after the end of the term of the bond.

The obligation of the bond was "that if the Principal shallduring the term of this bond faithfully account for and pay on legal demand all moneys deposited with it by or on behalf of thesaid obligee and shall not suspend payment during the termhereof . . ." (Our italics.)

It is true that the appellant here was a surety for hire and as such its contract will be strictly construed against it and in favor of the indemnity. It is equally true that this 1. contract must be interpreted by the ordinary rules of law. Pacific County et al. v. Illinois Surety Co. (1916), 234 Fed. 97; Gilmore and P.R. Co. v. U.S. Fidelity andGuaranty Co. (1913), 208 Fed. 277.

The obligee of this bond was not such an officer as comes within the various depository statutes. He was an officer of the court, it is true, but the bond in question was not given 2-4. in pursuance of any statute requiring it or as far as the record discloses by any order of court. The liability, therefore, is in the nature of a private bond and the company could make such a contract of indemnity and limit its provisions in any way it saw fit, unhampered by statutory restrictions.U.S. Fidelity and Guaranty Co. v. Poetker (1913),180 Ind. 255, 102 N.E. 372. The language of the bond is plain and unambiguous and, therefore, should be construed according to the reasonable and ordinary meaning of such language. Sparta StateBank v. Myers (1931), 202 Ind. 553, 177 N.E. 597. No real question of construction can arise under such circumstances.Hooper-Mankin Fuel Co. v. Chesapeake and O.R. Co. (1929), 30 F.2d 500, 502. Here the agreement appears to us to be clear. The limit of the liability as to time is the 18th day of January, 1930, if we give effect to every part of the contract. The language stating the term of the bond was definite:

"The term of this bond begins on the 18th day of January, A.D. 1929, and ends on the 18th day of January, A.D. 1930."

The bond itself also provided for extension and continuation by agreement in the following language:

"This obligation may be continued for any subsequent period by Continuation Certificate, signed and sealed by the Surety."

The evidence, however, shows no extension or continuation but it is agreed that the term of the bond expired on January 18, 1930.

It is equally true that the language of the bond stating the matters for which the surety should be liable is clear and definite, that is, that the principal would pay on legal demand and not suspend payment during the term of the bond. There is no contention that the principal on the bond ever refused to pay on legal demand or suspended payment until long after the term of the bond. On the contrary, the evidence shows clearly that the principal continued to pay promptly until long after January 18, 1930. On that date there was on deposit with the principal to the obligee's account the sum of $27,127.33, the greater part of which was thereafter withdrawn until of that sum only $3,272.20 remained at the time the principal closed and suspended payment.

The appellee cites to us and stresses with great force the case of United States Fidelity and Guaranty Co. et al. v. Poetker,supra; American Surety Co. v. Pangburn (1914), 182 Ind. 116, 105 N.E. 769. Those cases do not deal with depository bonds but with statutory bonds, the first concerning a bank cashier and the second a county treasurer. These cases deal only with the rule of liberal construction against the surety in case of ambiguity in the bond. As pointed out above we fail to find any ambiguity. The appellee also cites as controlling herein the cases of DallasCounty et al. v. Perry Nat. Bank et al. (1928), 205 Iowa 672, 216 N.W. 119; Hale County, Texas et al. v. American IndemnityCo. et al. (1933), 63 F.2d 275; Fidelity and Deposit Co.,etc. v. The City of Cleburne et al. (1924), 296 Fed. 643; andUnited States Fidelity, etc., Co. v. City of Pensacola (1914), 68 Fla. 357, 67 So. 87. The first of such cases deals with a deposit controlled by the statutes of Iowa with regard to the deposit of public funds. The term "during the term of the bond" does not appear in the contract, but the obligation was for repayment without regard to time and the Supreme Court of Iowa so properly construed the bond. The Hale County, Texas, case was in regard to a bond controlled by the statutes of Texas with regard to public deposits and was to the effect that the depository would "perform all the duties and obligations devolving upon it by law" and "turn over to its successor" all funds coming into its hands as such depository. Obviously, these two cases cannot be controlling here. The third case above mentioned, that of Fidelity and Deposit Co. v. Cityof Cleburne, supra, not only does not support the contention of the appellee, but on the contrary clearly supports the position of the appellant. In that case the language of the bond was the same as in the instant case, running from November 20, 1920, to November 20, 1921. The original depository contract of the city and the principal on the bond expired in August and was renewed. The bank failed on October 17, 1921, within the term of thebond. The court very properly points out that the liability of the bond was for failure to pay on demand during the term of thebond, in the following language (p. 647):

"The bond sued on is specific in providing that the term of it ``begins on the 20th day of November, A.D. 1920, and ends on the 20th day of November, A.D. 1921.' There is nothing in its recital of the appointment of the principal as city depository or in any other provision of it to indicate that the liability of its makers for city funds deposited with the principal was intended to be limited to deposits made during the term for which the principal had been designated as city depository." (This term expired August 20, 1921.) "On the contrary, by the unequivocal language of the condition of the bond the obligation is to be null and void only ``if the principal shall,' not during the term of its recited designation as city depository, but ``during the term of this bond, faithfully account for and pay on legal demand, all moneys deposited with it by or on behalf of said obligee, and shall not suspend payment during the term hereof.' The language used fairly shows that the parties contemplated the continuance of the principal as city depository during the term of the bond and the deposit with the principal of city funds during the entire year ending November 20, 1921, and that it was intended that the surety should be liable to the extent of the amount of the bond for a failure of the principal faithfully to account for and pay on legal demand all of such funds so deposited with it during that year. . . . Pacific County v. Illinois Surety Co. (D.C.), 234 Fed. 97." (Our italics.)

With regard to the last case mentioned above as relied upon by appellee, United States Fidelity, etc., Co. v. City ofPensacola, we also wish to discuss the principal case relied upon by appellant for reversal of the instant case, that is,Pacific County et al. v. Illinois Surety Co., supra. The latter case clearly distinguishes the City of Pensacola case from the one here involved. The Pacific County case, we believe, is clearly in point. The type of bond involved is similar and the observations of the court are clear and direct. In that case the bond was given for a period of one year commencing July 1, 1914, and ending July 1, 1915. The bank suspended payment and closed July 19, 1915, or eighteen days after the end of the term. The contention of the parties was the same as in the instant case. The essential parts of the bond in that case were as follows (p. 98):

"``If the said principal hereinbefore named shall, from noon on the 1st day of July, 1914, to noon of the 1st day of July, 1915, in due and ordinary course of business promptly pay to the said treasurer . . . upon demand . . . all moneys and proceeds . . . which have been or shall hereafter be deposited . . . by or on behalf of the said treasurer, . . . then this obligation shall be void. . . .'"

The court then decided the question before it on the language of the bond and distinguished the Florida case relied upon by appellee in this case as follows (p. 98):

"The language employed seems to be clear, and capable of conveying but one idea, and that is the limit of liability to the 1st day of July, 1915, and giving effect to every part of the contract. United States Fidelity and Guaranty Company v. Board of Commissioners, 145 Fed. 144, 148, 76 C.C.A. 114. And applying the same rules to this as any other contract (American Bonding Co. v. Pueblo Investment Co., 150 Fed. 17, 24, 80 C.C.A. 97, 9 L.R.A. (N.S.) 557, 10 Ann. Cas. 357), the intention of the parties appears to be conclusively established. The case of United States Fidelity Guaranty Co. v. City of Pensacola, 68 Fla. 357, 67 So. 87, relied upon by plaintiffs, is readily distinguished from the case at bar, in this: That liability in that case was not limited, but the defendant obligated itself to account and pay over all moneys which may be deposited within the time, and was not merely to insure the payment by the city of its deposits during the contemplated period, but to pay over all moneys received by the bank by deposits of the city during the stated period, and this obligation continued though the time had expired during which deposits could be made under the obligation of the bond; whereas, in the instant case, the life of the bond is fixed on its face, and in view of the express stipulation of the bond it cannot be reasonably contended that liability would extend for an indefinite period during which the funds would be under the protection of the operation of the bond, and until the plaintiffs saw fit to withdraw them. United States Fidelity and Guaranty Co. v. American Bonding Co., 31 Okla. 669, 122 P. 142."

Applying the same rule in the instant case in line with all the foregoing discussion, we hold that the appellant's demurrer to the amended complaint should have been sustained. The court below also erred in overruling appellant's motion for new trial as the decision of the court was contrary to law.

With regard to the other two specifications in the assignment of error, concerning the ruling of the trial court on the two motions, we find no error. These motion were interposed 5-7. only pursuant to Sec. 2-1005, Burns' Annotated Statutes 1933, § 155, Baldwin's 1934. This section of the code limits its application to conclusions necessary to make the pleading sufficient and does not consider every conclusion pleaded as one necessary to sustain the pleading. Tecumseh, etc., MiningCo. v. Buck (1922), 192 Ind. 122, 135 N.E. 481. The overruling of a motion to make a complaint more specific is only reversible error when the party making the motion is prejudiced by such ruling. In this case, as pointed out above, the facts were all stipulated by the parties. Under such circumstances, the appellant could not have been prejudiced by the rulings of the court on the two motions in question in such a manner as to make reversible error. Vulcan Iron, etc., Co. v. Electro MiningCo. (1913), 54 Ind. App. 28, 99 N.E. 429, 100 N.E. 307; Cline v. Rodabaugh (1933), 97 Ind. App. 258, 179 N.E. 6; Carter v.Richart (1917), 65 Ind. App. 255, 114 N.E. 110.

The judgment of the trial court is reversed with instructions to grant the appellant's motion for new trial and to sustain appellant's demurrer to appellee's amended complaint and for other proceedings consistent with this opinion.

Bridwell, J., not participating.

Wood, J., dissents.