County of Osceola v. Michigan Surety Co. ( 1933 )

In my opinion, the notice of cancellation, quoted in full by Mr. Justice POTTER, was not intended to, and did not, terminate the obligation in defendant's bond at midnight on September 22d. Its purpose was thus stated:

"This cancellation is for the purpose of effecting reduction in the amount of suretyship and so that substitute bonds may be executed and filed. Concurrently herewith there is submitted a new bond on behalf of the First National Bank of Reed City in the sum of $10,000, which is intended to supersede and replace the present bond of $20,000, which is canceled by the above notice. This new bond of $10,000 is effective September 23d and is properly signed and sealed by the bank and surety."

It appears that a similar notice was delivered to the county clerk and receipt acknowledged by him.

A reading of the entire notice and a consideration of the testimony of the county clerk and county treasurer satisfies me that the vice-president who signed the notice and Charles C. Blair, the "special agent" who delivered it, understood at the time it was delivered that the county clerk or county treasurer, one or both, had the power to accept the cancellation and to accept and approve the new bond for $10,000 tendered with it. The notice was delivered in the office of the county treasurer, and both he and the county clerk were then present.

Alf Zimmerman, the county treasurer, when asked about the delivery of the notice, testified:

"Q. When it was turned over to you, did you accept it?

"A. I told them I couldn't do it because I have no right. I told them it was a matter concerning the board of supervisors.

"Q. What did they say? What did the representative of the surety company say?

"A. The representative of the surety company said to me 'We ask you to keep it in your office, and to present it to the board,' something of that nature. I don't just exactly remember the exact words, but that was the meaning anyway.

"Q. To present it to the board of supervisors?

"A. Yes, sir.

"Q. Were the board of supervisors then in session?

"A. No, sir.

"Q. Were they in session from that time until after the time the bank closed its doors?

"A. No, sir."

He also testified that the $10,000 bond was delivered to him at the same time, and —

"Q. What did you say when this notice and bond was turned over to you, — the $10,000 bond?

"A. I told them I had no right to accept it, whatever.

"Q. Accept what?

"A. This bond of $10,000.

"Q. What else did you tell them here?

"A. Because it was not my duty; it was the duty of the board of supervisors to accept the bond and not mine.

"Q. So when he turned it over to you, you took the bond and notice, but told him you would not accept it?

"A. Yes, sir."

The county clerk, John F. Gardner, testified as to what occurred at that time:

"Q. When he turned this notice over to you, what did he say?

"A. He said, in effect, what it says in there, — that the bank — that they were carrying all of the bonding of the bank that they could, under the condition of the times, and that the bank wished them to carry some bonds for township treasurers in the various townships and in order to do that, they would have to reduce their bonds with us.

"Q. What did you say?

"A. I said it would be impossible, as he only had $20,000 bonds and we could hardly keep the deposits below that amount.

"Q. Was Mr. Zimmerman there at the time?

"A. Yes, sir.

"Q. What did he say?

"A. Well, I then said — in the second place, I wouldn't have any authority to accept that from you anyway, because it is a question for the board of supervisors, and that therefore I could not accept it as an acceptance of the notice.

"Q. The board of supervisors then in session?

"A. No; they were not.

"Q. When did they convene?

"A. I think the second Monday in October.

"Q. And that was the regular time, as provided by law?

"A. Yes, sir.

"Q. They convened at that session?

"A. Yes, sir.

"Q. And at that time?

"A. Yes, sir.

"Q. But had they been in session, — had the board of supervisors been in session from the time of this notice, on the 17th of September, up until the second Monday in October, 1931?

"A. They were not in session from the time they ended their June term until they came to their October term.

"Q. So you told him that, and what else did you say?

"A. Well, he said, of course we understand that, but we want you, — we have got to deliver it to you, and you can present it to the board of supervisors, and I said, on that basis I will receipt for it.

"Q. That is, that you would present it; present what?

"A. This cancellation notice.

"Q. This cancellation notice?

"A. Yes, sir."

Mr. Blair was questioned as to the statements made by him above referred to, and answered: "I don't remember of any such conversation."

In my opinion but one conclusion can fairly be drawn from this testimony and the language employed in the notice of cancellation. The defendant expected that the county officers would approve the $10,000 bond and that it would take the place of the one for $20,000. This is clearly indicated by the statement in the cancellation notice:

"Cancellation of the $20,000 bond will become effective at midnight September 22d, and the new bond for $10,000 will immediately thereupon become operative and effective. Thereafter appropriate adjustment of premium will be made."

And, when informed by the county officers that they could not accept the notice of cancellation, and that approval of the $10,000 bond must be had by the board of supervisors, Mr. Blair said, "We ask you to keep it in your office, and to present it to the board." Surely he had no thought, nor had the clerk and treasurer, that after midnight on September 22d the county would be without protection by a depository bond. Had the county treasurer so understood, it would have been his duty to have withdrawn the moneys of the county in the bank or required other security therefor. Both he and the county clerk rested content upon their understanding that the status quo would be maintained until the board of supervisors would meet and pass upon the $10,000 bond or take such other action as they might be advised.

Entertaining this view, I do not deem it necessary to discuss or pass upon the contention of the plaintiff that the provision in the bond for cancellation is surplusage and unenforceable.

It appears that the bank had also given a depository bond of the United States Fidelity Guaranty Company, which expired on January 31, 1931, and that the board of supervisors had requested the bank to furnish bonds to take its place. On April 16, 1931, the board adopted a report of the ways and means committee, which stated that they had consulted with the bank —

"with regard to securing a bond in the sum of $30,000 running to January 1, 1932, as a depository bond for the coverage of Osceola county deposits and when said bonds will be furnished and submitted to the prosecuting attorney for acceptance as soon as said bond can be procured."

Pursuant thereto, the bank executed a bond with Arthur Adamy as surety and another with Edward E. Bettin as surety, each in the sum of $15,000, and dated May 11, 1931, and delivered the same to the county treasurer. The county clerk testified that, at a meeting of two of the officials of the bank and a committee of the board of supervisors and the prosecuting attorney, the matter of their approval was discussed, and that the prosecuting attorney declined to accept and approve them for the following reasons:

"First: Because of the fact they were not surety bonds, and there was no authority in the records of the board of supervisors to accept anything but surety bonds;

"And second: He was not satisfied with one of the people that gave the bond, — Mr. Adamy;

"Third: He questioned the authority of the board of supervisors to delegate to him, as they had in their resolution, authority to accept for the board."

This testimony was admitted over the objection of defendant's counsel that it was "hearsay and self-serving testimony." The defendant in its answer gave notice that at the time the bank closed it had given the county other depository bonds aggregating $30,000 in amount, and that its liability was limited thereby, and its counsel had, before this testimony was admitted, cross-examined the county clerk relative to these bonds. There being no record evidence as to their presentation to the county officers, and the action taken thereon, this testimony was admissible to show that they had not been approved and the reasons therefor.

Counsel urge that action might have been brought on these bonds, and that the sureties would have been estopped from insisting on a lack of approval thereof. People v. Johr,22 Mich. 460. Had the treasurer accepted them from the bank and filed them in his office, a different question would be presented. But the officer to whom the board of supervisors had directed that they should be submitted for acceptance refused to approve them, and no binding obligations on the part of the sureties thereon were created. See, 9 C. J. p. 18; 18 C. J. p. 586; Bachelor v. Korb,58 Neb. 122 (78 N.W. 485, 76 Am. St. Rep. 70); Maryland Casualty Co. v.Pacific County, 158 C.C.A. 171 (245 Fed. 831).

The amount on deposit in the bank to the credit of the county treasurer at the time it closed on October 2d was $19,986.40. The county treasurer's books showed an indebtedness of but $4,484.34. This discrepancy is accounted for by outstanding checks which had not been presented for payment. On September 21st, the treasurer had sent two checks to township treasurers for primary money, amounting to $9,257.10, and on September 28th he had sent a check to the auditor general for $6,308.88. These and a few small checks issued prior to September 21st were credited to the bank on the treasurer's books, but had not been presented for payment at the time the bank closed.

The defendant insists that as to all of these checks, except the last, which is hereafter considered, there was an inexcusable delay in their presentment for payment, which discharged the county, and that the indebtedness of the bank to the county was reduced thereby. As between the drawer and the person to whom a check is made payable, the failure of the latter to present it for payment within a reasonable time discharges the former from liability. 2 Comp. Laws 1929, § 9435. But, in my opinion, this question cannot be raised by the defendant. It had obligated itself in its bond to pay to the county on legal demand all moneys deposited by the county treasurer in the bank which had been named as a depository therefor. When the bank closed, it had on deposit $19,986.40, deposited therein by the county treasurer, and the fact that checks had been drawn thereon, but not presented or paid, in no way relieved it of such indebtedness. Our attention is not called to any authority in which this question is discussed or decided, but, in my opinion, no other construction can fairly be placed upon the obligation of the bank or that assumed by the defendant in its bond to the county.

The books of the county treasurer disclosed that at the time the bank closed there were credits thereon to the mortgage tax fund of $47; to the delinquent tax fund of $3,736.40; to the teachers' institute fund of $89.27; to the township fund of $2,702.31; to the city and village fund of $92.69; to the escheats fund of $564.68; to the redemption fund of $3,131.88, and to the May tax sale fund of $3,941.53, a total of $14,305.76, and it is insisted that this sum —

"is not a proper claim under the bond for the reason that they were not funds of the county of Osceola within the terms of the bond."

It is the duty of the county treasurer to receive such moneys and to pay them out to the parties entitled thereto. The bond recited that the bank "has been designated as a depository of funds of Osceola County, Michigan." The obligation of the defendant as a surety is thus stated:

"Now, therefore, the condition of the above obligation is such, that if the above bounden principal shall, in due course, pay on legal demand made during the terms of this bond, all moneys deposited pursuant to such designation, including any balance on deposit at the beginning of said term, together with interest at the rate agreed upon, then this obligation shall be void, otherwise of full force and effect."

The agreements and limitations therein in no way affect this obligation. These moneys, and that for which the check was sent to the auditor general, heretofore referred to, were deposited by the county treasurer pursuant to such designation, and the defendant is in no way relieved by the fact that they were, strictly speaking, not moneys belonging to the county. See,Lawrence v. American Surety Co., 263 Mich. 586.

The judgment is affirmed.

CLARK, NORTH, FEAD, and BUTZEL, JJ., concurred with SHARPE, J.