Case Name: Jones v. Hadfield
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1936-02-17
Citations: 192 Ark. 224
Docket Number: 4-4175
Parties: Jones v. Hadfield.
Judges: Smith, McHaney and Butler, JJ., dissent.
Reporter: Arkansas Reports
Volume: 192
Pages: 224–244

Head Matter:
Jones v. Hadfield.
4-4175
Opinion delivered February 17, 1936.
Ed I. McKinley, Jr., T. II. Humphreys, Jr., and Sam T. <& Tom Poe, for appellants.
Horace Chamberlin, Bonham £ Fulh and Fred A. Bonham, for appellees.

Opinion:
Baker, J.
O. D. Hadfield was elected and served two terms as tlie city treasurer of tlie city of Little Rock. His second term expired April 10, 1933. Gr. L. Alexander was elected as Ms successor.
Oil tlie expiration of Hadfield's second term he failed to pay over to Alexander, Ms successor in office, $63,280.07, which belonged to the Firemen's Relief & Pension Fund, of Little Rock. This money had been deposited by Hadfield in the Peoples Trust Company and said company was upon a restricted basis from a time not made certain, but, at least, from March, 1933, and upon that account was not able to pay all deposits in full.
Alexander, the newly-elected treasurer, made demand for this money, but took no step to make the collection or have it paid over to him as the successor of Had-field. Peoples Trust Company was taken in charge by the banking department, and there was paid on May 2, 1933, $31,640.03, and later on June 22, 1934, $9,492.01, leaving a balance of $22,148.03 still owing by Hadfield to his successor in office.
To recover this last-mentioned sum or balance, a suit was filed against Hadfield, and against Fidelity & Deposit Company of Maryland, surety upon his bond, to require the payment of this sum of money, and, on account of the fact that the newly-elected treasurer would not join in this suit, the complaint showed that fact and named him as a defendant under the provisions of § 1097, C. & M. Digest.
In the circuit court there was a recovery against Hadfield for the balance due, with interest at 6 per cení, from the date of the judgment. The court found in favor of the Fidelity & Deposit Company of Maryland, and discharged it.
The appeal challenges the correctness of that judgment in that the appellants claim that judgment should have been rendered for interest at 6 per cent, from the date Hadfield retired from office, and that judgment should have been rendered against the surety upon his bond for the same amount.
The appellees tendered several defenses. One is that the two minor appellants showed no interest, such as would permit them to sue. It was contended also that the bond executed by Hadfield was at most only a common-law obligation, by the terms and conditions of which it merely was a guaranty of the honesty or integrity of Hadfield, a fidelity bond, and that there was an express saving or exemption from liability for any loss that might have been occasioned by the deposit of money in any banking institution.
We will attempt by our discussion to dispose of all (hese matters, not in the order named, for the reason that some of these matters have passed out of the case.
The first proposition we are to discuss is the one of proper parties plaintiff in the prosecution of the suit. Corine Jones and Arthur Jones were minor children of the former fireman who lost his life in the discharge of duty, and they claim they are the prospective recipients of relief from the funds sued for, but on account of the fact that the money was not paid over the relief has not been forthcoming, but has been denied to them. Appellees, however, agree that the city is a proper party. In fact they argue that it is the only proper party. Before the trial of this case, however, the statutory trustees, who have control of the disbursement of this fund, were all made parties to the suit, joining the two Jones children, adopting their pleadings to a large extent, and asking for recovery against Hadfield and surety upon this bond, which recovery meant, not that the Jones children, or any other plaintiff, would recover any money or be favored with the judgment for himself individually, but that such recovery as was had must be against the defendants to require restoration of this money to the particular fund in the custody of the city treasurer. There is no necessity of an elaborate discussion of this matter at this time. It could avail nothing to decide the now mooted question of the propriety of permitting the Jones children to maintain the suit. If these children have in fact no interest in the fund that matter will most probably be property tested upon claims (hat they may make or present to the trustees after the funds shall have been collected and paid to the city treasurer. Bonds made by officials to the State or city may be sued upon by any one interested.
It is argued vigorously by the appellees that this is a public fund belonging to the city of Little Bock. Let it suffice to say that if it is such, it is one in which the city has a naked legal title with no beneficial interest whatever. It is true the treasurer is the proper custodian of this fund. That is not disputed by any party in interest, but the fund does not arise out of taxes, li cense fees and such other sources of revenue as are under the control of the city government, composed of the mayor and edy council. No part of these funds may properly be used by the city government for any purpose whatever. The money creating this Firemen's Relief & Pension Fund arises out of the provisions of act No. 491 of the Acts of 1921. The same act provides for the payment of the money into the custody of the city treasurer, makes it his duty to receive the fund, and provides that his bond shall be liable therefor. Section 15 of act 491 of the Acts of 1921.
The said act also provides for a board of trustees, whose duties are defined by § 14. Any one interested in reading the aforesaid act, and considering the provisions thereof must be convinced at once that the real custodians of the fund are the trustees and the city treasurer. It is conceded the city had a right to sue; if so, it could recover only for the proper custodians. Hence, the question of proper parties plaintiff is no longer of importance, as all interested parties were properly before the court at the time of the trial.
The trustees sued for this money and, since the treasurer was not 'willing to become a party plaintiff, properly joined him as a defendant and any recovery accrues for the benefit of the fund, but under the statute, it must be held by the defendant, Alexander, as city treasurer, or his successor in office.
The bond executed by Hadfield, the city treasurer, had all of the usual incidents and provisions of the statutory bond. In fact, it was such, but to it was added the following provision:
"It is mutually understood and agreed between all parties hereto, that the said surety shall not be liable to said city of Little Rock, Arkansas, for any loss resulting to said city of Little Rock, Arkansas, by reason of any public moneys being now on general or special deposit or hereafter placed on general or special deposit by or on behalf of the said principal with any bank, depository, or depositories, or by reason of the allowance to or acceptance by said principal of any interest thereon, any law, decision or statute of the State of Arkansas, or or dinance of the said city of Little Rock, Arkansas, to the contrary notwithstanding; ' '
It is contended that the surety company was not compelled to execute a bond and that since it was willing to be sufficiently accommodating to make the bond for the treasurer, it had the right to say upon what conditions or provisions it would execute the instrument. The force of this argument must necessarily have an appeal to every fair-minded, thinking citizen. The right of freedom to contract is not one to be dealt with lightly nor to be thwarted by specious judicial construction. The record does not disclose the fact, if it be one, that the surety would not have executed this bond without having added to it the saving or exemption provision above noted. It is argued, however, that such is the fact and that the city had full knowledge and information in regard to the attitude of the surety upon the bond, and accepted the bond and thereby agreed to this exemption or saving paragraph.
We think appellants might well have conceded this proposition in the presentation of this case upon trial and appeal. Such concession would not have operated to release or discharge the surety.
According to our comprehension, governments are instituted for the benefit of the governed, and the primary purpose of all government and the creation of offices is for the protection of the citizen in all his rights. Under this theory, bonds are required of those handling' public funds, not for the benefit of the office-holder in whose possession the funds are placed, but for the protection of the entire citizenship. It is a matter of public policy that security must be given as a condition precedent to a proper qualification for office and for the assumption of the responsibility thereof. The officeholder must yield obedience to the mandates of the law requiring him to give security. If he be unwilling or unable to do this, he cannot properly enter upon the office in the discharge of his duties. Act 491 of the Acts of 1921 takes cognizance of the fact that the city treasurer must have a bond. See § 15.
The ordinance is as follows:
"City officers — bonds of. All city officers hereinafter mentioned that may be now or hereafter elected or appointed, shall, before entering upon the discharge of their respective offices, each take the oath required by law, and give bond, with good security, for the faithful discharge of his office and duty, in the sum and amount as follows, to-wit: ; the city treasurer shall give such bond in the penal sum of $50,000; All of the bonds provided for in this section shall be made by some reputable surety or bonding company and the annual premiums shall be paid by the city of Little Rock out of the general revenue fund. . Ord. September 8, 1886." It is authorized by § 7517, C. & M. Digest. The city council of Little Rock had made due provisions for a bond by the ordinance copied above. The foregoing facts are taken from pleadings and agreed statement of facts. Other details will be set out in the discussion.
At the time Hadfield qualified for office the mayor, members of the city council, nor any one else had any right, power or authority to waive any provisions of the statute or ordinance then in force. We are not saying that the city council may not have made a different ordinance, nor are we saying that the Legislature may not have made a different provision, but there was no new ordinance and there was no new legislative act. This fact was known to the members of the council and also to Mr. Hadfield, and perhaps better known to the surety upon Mr. Hadfield's bond, because it attempted to contract against the effect of ordinances, statutes, and decisions of the courts contrary to the saving clause or exemption which is added to the bond. This it was powerless to do. City officers were powerless to consent thereto. The bonding company was without powder to legislate by contract and bend the law so as to conform to its desire, nor did it have the power to recall judicial decisions and make them of no effect. The public policy which must govern is declared by statutes and ordinances. Officers who must make bonds do so because required by law. They and their sureties have as much right to ignore the law as they have to waive its salient and salutory provisions. No more.
Appellees insist the bond sued upon in this ease is not a statutory bond, such as we have been discussing, but a common-law obligation. Even so, he and his surety contracted "to account for all money coming into his hands, according to law, etc. ' ' The interests of the public justify the enforcement of a common-law bond when it has been substituted for a statutory one. But even in a common-law bond, we cannot give effect to contractual provisions and limitations in contravention of statutes and ordinances. "To account for the money that came into his hands according to law" means that at the end of Ms term he would pay over the amount on hand to Ms successor. "He will faithfully perform all and singular the duties incumbent upon Mm" is the measure of the obligation, according to law, and neither one, he nor the surety, can contract, legally, to do less.
The bond under consideration in the case of Fort Smith-Van Buren Bridge Dist. v. Johnson, 181 Ark. 161, 25 S. W. (2d) 417, is a good example of an enforceable common-law obligation. By comparison of the language of the bond therein and the one under consideration here, the difference becomes obvious. The conditions 'in the Johnson bond were a part of it, but in the Hadfield bond the conditions are in conflict with its obligations. So if the added or questioned part of the bond sued upon be omitted as it must be as inconsistent with the kind of bond authorized and contemplated by law, then there remains the statutory bond.
Bonds made by officers are statutory bonds. Into them the statute is written. In other words, all of the conditions and stipulations are statutory. Whatever else may be added, by way of limitation or impairment, must be deemed surplusage. Kansas City Southern Ry. Co. v. U. S. Fidelity & Guaranty Co., 174 Ark. 318, 325, 295 S. W. 705; Phillip Cory Co. v. Maryland Casualty Co., 201 Ia. 1063, 206 N. W. 808, 47 A. L. R. 495; Von Hoffman v. Quincy, 4 Wall. 535, 18 L. Ed. 403; Fogarty v. Davis, 305 Mo. 288, 264 S. W. 879; Duke v. National Surety Co., 131 Wash. 700, 230 Pac. 102; Continental Life Ins. Co. v. Chamberlin, 132 U. S. 304, 10 S. Ct. 87, 33 L. Ed. 341, 9 C. J. 35, 52 C. J. 1108, § 199; Williamson v. Williams, 262 Mich. 401, 247 N. W. 704, 89 A. L. R. 442, 443; August v. Collins, 260 Mich. 232, 244 N. W. 458; Chambers v. Cline, 60 W. Va. 588, 55 S. E. 999. Provisions in contravention of the statutes are void. Southern Surety Co. v. Cochine Co., 27 Ariz. 473, 233 Pac. 897; Davis v. West Louisiana Bank, 155 La. 245, 99 So. 207.
Such, provisions are surplusage. Limestone Co. v. Montgomery, 226 Ala. 266, 146 So. 607, 87 A. L. R. 164; Leach v. Commercial Savings Bank, 205 Iowa 975, 213 N. W. 612, 22 R. C. L. 497, § 177.
The foregoing propositions are supported so generally and by so many of the highest courts of the country as to admit no controversy as to their soundness. Both defendants became liable upon default, April 10, 1933, not for use of funds, or on account of embezzlement, or other shortage imputing culpable misapplication of funds. They are both insurers, the officer under the law, the surety by contract.
Judgment of trial court is reversed, and judgment is entered here for balance of principal, $22,148.03, and accrued interest at 6 per cent, till paid, with costs.
Smith, McHaney and Butler, JJ., dissent.