Case Name: Douglass v. Ferris et al.
Court: New York Supreme Court, General Term
Jurisdiction: New York
Decision Date: 1892-04-04
Citations: 18 N.Y.S. 685
Docket Number: 
Parties: Douglass v. Ferris et al.
Judges: 
Reporter: West's New York Supplement
Volume: 18
Pages: 685–695

Head Matter:
Douglass v. Ferris et al.
(Supreme Court, General Term, Third Department.
April 4, 1892.)
L Principal and Surety—Death of Surety—Liability of Estate.
Before Code Civil Proc. § 758, was amended, in 1877, the death of a joint surety discharged his estate from liability on his joint obligation. Held, that the amendment did not affect a bond given in 1872, and that the death of a joint surety thereon in 1887 discharged his estate from liability.
2. Parties—Action on Bond.
Under Code Civil Proc. § 454, providing that two or more persons, severally liable on the same written instrument, may, any or all of them, be included as defendants in the same action, at plaintiff’s option, an action against joint and several sureties on a guardian’s bond may be discontinued as to one, revived against the representative of another, who has died, and continued as to a third.
8. Guardian—Fraudulent Settlement with Ward—Sureties.
The act of a guardian in inducing his ward, on his attaining his majority, to accept in payment of the amount shown due by the guardian’s account a worthless note and mortgage, is a violation of the guardian’s duties, as such, for which the sureties in the guardian’s bond are liable, though the account rendered was correct.
4. Same—Effect of Judgment.
In such a case a judgment against the guardian, setting aside his discharge and the decree thereon, and directing the payment of the moneys by the guardian, is evidence against the sureties, and prima fade binding on them. Mayham, J., dissenting.
6. Same—Extending Time of Payment.
Where a note and mortgage taken by a ward from his guardian would have operated as actual payment except for the guardian’s fraud, the setting aside of the attempted payment for the fraud will not operate to extend the time of payment of the original indebtedness.
6. Same—Laches.
A fraud by a guardian, on Ms ward, was committed in May, 1879, and the latter, on discovery of the fraud, in November, 1880, demanded a rescission of the transaction, and payment of the original amount, to which the guardian assented, and in February, 1882, paid a portion thereof, but in April, 1882, transferred his property, and refused further payment, whereupon' suit was brought to annul the attempted payment and set aside the discharge and decree of the surrogate thereon, on which final judgment was entered in June, 1885, and an action against the sureties was commenced in October following. Held, that there was not such an extension of the guardian’s time or valid release as would exonerate the sureties, nor did the delay constitute such loches as would release them. Mayham, J., dissenting.
7. Same—Liabilities of Sureties—Costs of Action against Guardian.
In an action by a ward against the sureties on the bond of his guardian, for such guardian’s default, plaintiff may recover the costs and expense of an action to set aside a settlement induced by the guardian’s fraud, and to secure an honest accounting.
8. Same—Duty' of Sureties.
A ward need not notify the sureties on his guardian’s bond as to the guardian’s dishonesty in making a final -settlement, to hold them to their obligation. If they neglect to see that their principal discharges Ms duty, it is at their peril.
9. Same—When Guardian’s Duty Ends.
A guardian’s duty does not end when his ward comes of age, and Ms sureties are responsible for an honest account of the funds in his hands, and payment thereof to the ward. Mayham, J., dissenting.
Appeal from circuit court, Clinton county.
Action by William 0. Douglass against Peter Ferris and Abbie A. Prouty, as executrix of Rodney Sargent, deceased, to recover upon a guardian’s bond, upon which the defendant Ferris and another and Rodney Sargent were sureties. Judgment for plaintiff. Defendants appeal.
Affirmed.
For former report, see 3 2ST. Y. Supp. 956.
The following opinion was rendered by Mr. Justice Tapp an on the trial:
“The facts found are contained in the decision, and need not be separated further than is necessary to state clearly the points involved in the decision. The bond sued upon is joint and several. Before section 758 of the Code of Civil Procedure was amended (September 1, 1877) the death of a joint surety discharged his estate from all liability upon such contract. The bond in suit was given in 1872. The death of Rodney Sargent, January 28, 1887, discharged his personal representative from the joint liability of her testator upon such bond. 3 Rev. St. (5th Ed.) p. 669, § 1; Getty v. Binsse, 49 N. Y. 385; Wood v. Fisk, 63 N. Y. 245; Risley v. Brown, 67 N. Y. 160; Hauck v. Craighead, Id. 432. September 1, 1877, section 758 of the Code of Civil Procedure was amended so as to read that the estate of a person or party jointly liable upon contract, with others, shall not be discharged by his death, but the court may make an order to bring in the proper representative, when necessary to do so. This amendment did not affect the bond in suit, which had been gi yen before it became the law. 3STo act of the legislature could alter the effect of this bond, to the prejudice of either party. The law as it stood when the bond was given is considered a part of the written condition thereof. U. S. v. Price, 9 How. 83; Fielden v. Lahens, 6 Blatchf. 524; Randall v. Sackett, 77 N. Y. 480; Smith v. Kibbe, 31 Hun, 390, 392.
“ The action was revived under the provisions of section 454, Code Civil Proc., which provides that two or more persons, severally liable upon the same written instrument, may, all or any of them, be included as defendants in the same action, at the option of the plaintiff. Under this section the plaintiff had the right to join the original defendants in the action; to discontinue the action as to the defendant Gilletta Low; and, at the death of Rodney Sargent, to revive the action against the defendant Abbie A. Prouty,' as personal representative of said deceased defendant; and to continue the same to judgment against the present defendants, taking a personal judgment against the defendant Peter Ferris, and a judgment to be collected by due course of administration against the defendant Abbie A. Prouty, sole executrix of Rodney Sargent, deceased. Churchill v. Trapp, 3 Abb. Pr. 306; Eaton v. Alger, 57 Barb. 179, on appeal, 47 N. Y. 345; Hauck v. Craighead, 67 N. Y. 432, 436.
“The condition of the bond in suit is that Edwin B. Low shall well and faithfully, in all things, discharge the duty of guardian of the plaintiff, his ward, according to law, and render a just and true account of all moneys and property received by him, and of the application thereof, to and before any court haying cognizance thereof, when thereto required. The case presented by the evidence shows that the guardian, soon after his ward attained his majority, rendered a correct account, showing the true balance remaining in his hands, but did not pay such balance, but by fraudulent representations induced his ward to receive in payment a worthless note and mortgage, taking from him a discharge and authority to enter a decree with the surrogate of Essex county, who had appointed the guardian, judicially settling his account, and discharging him and his sureties upon the bond in suit. As the guardian rendered a correct account, showing the true balance, it is insisted by the counsel for the defendants that the fraud committed by the guardian in making the payment was not part of his conduct as guardian, but was the individual fraud of the guardian, and not within the condition of thé bond. The condition that the guardian shall in all things faithfully perform his duty according to law requires him, not only to render a correct account, but to actually pay over the balance to the ward, when he is entitled to receive it. Any colorable payment, made with counterfeit coin, spurious bills, or checks drawn upon a bank in which there were no funds to pay, or any payment received by the ward because of the fraudulent representations of the guardian, does not operate as a payment in fact, and does not discharge the sureties upon the guardian’s bond. Bank v. Buchanan, 87 Tenn. 32, 9 S. W. Rep. 202, 10 Amer. St. Rep. 617, note at page 619, and eases there cited. The undertaking of the surety that the guardian shall actually pay protects the ward against any fraud of the guardian, committed in the attempt of the latter to make payment or to obtain satisfaction or discharge of the debt due by the guardian, as such, to the ward. Until the guardian had paid the ward the money, or property which was a just equivalent for it, he had not faithfully performed his duty as guardian. After such payment has once been made, the liability of the guardian, as such, and of his sureties, ceases. Further dealings of the guardian, whereby he defrauds the ward, are personal fraud, not involving his conduct as guardian, for which the sureties upon his bond cannot in any manner be made liable. The release and discharge from plaintiff to Edwin B. Low, his guardian, having been declared void for fraud by a court of competent jurisdiction, the liability of the defendants as sureties upon the bond of the guardian, if not affected by loches, remains the same as though the release had never been given. Parr v. State, (Md.) 17 Atl. Rep. 1020; Amer..Dig. 1889, p. 1722. The attempted payment by Edwin B. Low, as guardian, to the plaintiff, his ward, and the discharge given therefor, and the decree in the surrogate’s court, based therébn, having been set aside for the fraud of such guardian, and it having been affirmatively adjudged in an action brought in this court by the plaintiff against Edwin B. Low, as guardian, that said Low, as such guardian, pay a sum of money to plaintiff, for which he is liable as guardian, such judgment and decree, obtained in the manner and under the circumstances detailed in the findings of fact, is evidence against the sureties upon said guardian’s bond, and is prima facie binding upon them. Bockfeller v. Donnelly, 8 Cow. 623; Thayer v. Clark, 48 Barb. 243; Binsse v. Wood, 37 N. Y. 526; Gerould v. Wilson, 81 N. Y. 573; Scofield v. Churchill, 72 N. Y. 565; Casoni v. Jerome, 58 N. Y. 315; Harrison v. Clark, 87 N. Y. 572; Heard v. Lodge, 20 Pick. 53, 32 Amer. Dec. 197, and note page 202; Parr v. State, (Md.) 17 Atl. Rep. 1020, Amer. Dig. 1889, p. 1722. There being no evidence in any manner rebutting the reasonable inference to be drawn from the judgment roll, in that case, it is proof of the fact of the liability of Low as guardian to the plaintiff, and is competent evidence of the guardian’s fraud. Thomas v. Hubbell, 15 N. Y. 405; Lee v. Clark, 1 Hill, 56; Insurance Co. v. Wilson, 34 N. Y. 275; Conner v. Reeves, 103 N. Y. 527, 9 N. E. Rep. 439; Heard v. Lodge, 20 Pick. 53, 32 Amer. Dec. 197, 202; Gillett v. Wiley, 126 Ill. 310, 19 N. E. Rep. 287, 9 Amer. St. Rep. 587.
“The judgment before mentioned determined that there was a sufficient rescission of the attempted payment, with a proper offer to restore the note and mortgage, and the same have always since remained at the disposal of Low, and were ready to be delivered to him at the trial. The note and mortgage were taken as actual payment, and except for the fraud of Low would have operated as payment, of the amount due from him to the plaintiff. As the attempted payment was set aside for fraud, it did not operate to extend the time of payment of the original indebtedness. It does not appear that there was any irregularity in the entry of final judgment in the action between the plaintiff and Low. An irregularity of the kind claimed could only be corrected by proper motion. Wright v. Hostrand, 94 N. Y. 32.
“It is insisted by the counsel for the defendants that such loches on the part of the plaintiff are shown that the sureties upon the guardian’s bond are released. The fraud of Edwin B. Low, the guardian, was committed May 14, 1879. It was discovered by plaintiff in November, 1880, and was by him immediately communicated to Low, and the plaintiff then demanded that the transaction respecting the note and mortgage, by which the fraud was committed, and all proceedings which had been taken under the discharge and decree of the surrogate, should be canceled and treated as void, and that said Low, as guardian, pay the $3,200 and interest, for which the note and mortgage had been substituted, to which Low assented, and promised to make such payment, and in February paid $800. In April, 1882, Low transferred his real estate to his wife, and made no further payment upon the amount' acknowledged by him to be due to the plaintiff. In October, 1882, plaintiff commenced the action against Low, his guardian, in which judgment was entered in February, 1885, vacating the attempted payment by the note and mortgage, and setting aside the discharge and the decree of the surrogate based thereon, and giving judgment in favor of the plaintiff against Low for the amount due by him as guardian. On June 9, 1885, the judgment had been affirmed by the general term, and final judgment was entered. On June 15, 1885, executions on the judgments were issued, and returned unsatisfied. This action was brought October 31, 1885, and then the sureties first became aware of the fraud of Low, and of the proceedings taken by the plaintiff in consequence of such fraud. On June 27, 1885, Low was, and since then has been, insolvent. It is fairly to be inferred that the assent of Low and his promise to pay in November, 1880, and afterwards often repeated, and his payment in February, 1882, were the cause of plaintiff’s failure to prosecute an action against Low until October, 1882. From that time until the commencement of this suit, plaintiff was prosecuting the suit against his guardian to avoid the effects of his fraud, and to put himself in condition to prosecute the sureties; the guardian during all the time unjustly defending and interposing to delay. Under the circumstances, did the plaintiff owe any duty to the sureties which he omitted? They undertook, as has been shown, to guard and protect him against the fraudulent conduct of his guardian. He had undertaken to settle with this guardian when he attained his majority, and to obtain payment. In the attempt to pay him the guardian had cheated and defrauded him, and in that way had obtained his discharge. Until such payment and discharge had been set aside for the fraud, plaintiff could not call upon the sureties, and he had the right to take the proper proceedings for that purpose. Whatever time was necessarily taken for that purpose, plaintiff was entitled to. The guardian was not faithfully performing his duty when he committed the fraud, nor was he when he re sisted proper legal proceedings to vacate and set aside what he had gained by his fraudulent conduct as guardian. The delays were caused by the fraudulent and improper conduct of the guardian, as such, against which the sureties had undertaken to guard the plaintiff. The sureties were bound to know that any transaction between plaintiff and Low, by which he defrauded plaintiff in paying over such money, was liable to be set aside for such fraud, and that nothing short of actual payment would release the guardian or his sureties. It was their duty to protect .themselves by such inquiries as to payment as would have put them into possession of the facts. The plaintiff was in the neighborhood, and they could have made inquiry of him. Without such inquiry, he had no occasion to communicate with the sureties. The plaintiff having acted reasonably, under the existing circumstances, and the delay in calling upon the sureties having been caused by the fraudulent and dishonest conduct of the principal, the guardian, for whom the sureties had undertaken that he should, as guardian, act honestly and without fraud, such delay does not constitute loches which w'ill discharge the sureties. Gillett v. Wiley, 126 Ill. 319, 19 N. E. Rep. 287, 9 Amer. St. Rep. 587, note, and cases cited. I. see no reason why the plaintiff should not recover the cost arid expense in undoing the fraud of the principal, and in securing an honest accounting. Judgment is ordered against the defendants for $3,509.74, and interest thereon from February 16, 1885, to April 8, 1889, and for $193.63, and interest from the same time, and for $72.50 and interest from June 9, 1885, to April 8, 1889, amounting to the time of trial to the sum of $4,714.04; said judgment to be entered against the defendant Peter Ferris personally, and against the defendant Abbie A. Prouty as sole executrix of Rodney Sargent, deceased, to be paid by due course of administration. Plaintiff is entitled to costs of this action, with an additional allowance of five per cent, upon the amount of the recovery aforesaid. Judgment is ordered accordingly.”
Argued before Mayham, P. J., and Putnam and Herrick, JJ.
Hand, Kellogg & Hale, (Richard L. Hand, of counsel,) for appellants. Corbin & Rowe, (Royal Corbin, of counsel,) for respondent.

Opinion:
Herrick, J.
For the reasons set forth in the opinion of Mr. Justice Tap-pan in the court below the judgment appealed from should be affirmed. In addition to, but in harmony with, the views expressed by the trial court, the following suggestions are made:
It seems to me that it was not necessary for the plaintiff to notify the sureties of the dishonesty of his guardian, in order to hold them to the obligation of their bond. They owed more than a passive duty. They should have seen to it that their principal discharged his duty. If they neglected it, they did so at their peril. Forrester v. State, 41 Md. 161; Gillett v. Wiley, 126 Ill. 310, 327, 328, 19 N. E. Rep. 287. A guardian's duty does not end as soon as his ward becomes of age. He must then make a settlement with his ward, and honestly,account and pay over what is coming to him; and the sureties are responsible that he does so. I cannot assent to the idea that because, when the ward became of age, he has legal capacity to act for himself, the sureties are no longer responsible for the transactions between himself and his guardian in settling the estate. One of the most important duties the guardian owes to his ward is an honest accounting and settlement with him, and that necessarily cannot take place until he is of age; and, instead of being in any sense released by the transactions of the ward with his guardian, it seems to me it is just the time when, if ever, the sureties owe an active duty to see that their principal acts—as they have bound themselves he would act—as an honest man. In my opinion the defendants are in a somewhat different position from' an indorser upon a note or a guarantor of a bond, or any surety who merely binds himself to pay a sum of money or ful fill a contract if his principal does not. Here the sureties guaranty the fidelity •and honesty of the guardian. The obligation is that the principal " shall well and faithfully, in all things, discharge the duty of guardian." If he Tails in that, they are responsible for the damages the ward suffers through That lack of fidelity. It is something more than warranting his pecuniary ¡responsibility, where, if he does comply with his contract to pay, and the 'creditor by his delay suffers him to become impecunious, so that the sureties cannot collect from him, the creditor by his loches has placed the sureties in a position where they cannot make themselves good. Here, as we have seen, the bond was for fidelity and honesty. Acting promptly would not have made him honest. Delay has not made him any more dishonest than he was before.
Honesty and fidelity are the main things guarantied, not pecuniary responsibility. But, even upon the ground of delay, I do not see that the defendants have any sufficient reason to be released. The delay caused by the legal proceedings cannot be considered on the question of loches. Laches «can only be predicated upon the time that elapsed from the discovery of the fraud until the commencement of the suit against the principal. Ho inflexible rule can be laid down as to what constitutes loches. It depends upon the circumstances in each particular case. The evidence in this case is not before us, but it is fairly to be inferred from the facts found that there were negotiations between the plaintiff and his guardian, and promises to pay by the guardian, so that the plaintiff was kept in constant hope and expectation of a settlement, and a part payment was made. Plaintiff first became aware of the fraud in Hovember, 1880, and immediately made demands upon his guardian for payment. This was promised, but not fulfilled, in February, 1882, a part payment was made, and, no further payment being made, in October, 1882, he commenced his action against his former guardian. I do ¡not think that the delay, under all the circumstances, constituted loches that would release the defendants. There was no extension of the guardian's time, or valid release of him, by the plaintiff, by which the plaintiff was prevented from prosecuting him upon his obligation to make an account. The fraud practiced vitiated the whole proceeding and settlement, so that it in no way acted as an extension of time or stay of proceedings. Lowman v. Gates, 37 N. Y. 601. Mere indulgence or delay by the creditor to prosecute the principal debtor will not release the surety. Albany Dutch Church v. Vedder, 14 Wend. 165; Supervisors v. Otis, 62 N. Y. 88; Powers v. Silberstein, 108 N. Y. 169, 15 N. E. Rep. 185; Machine Co. v. Farrington, 82 N. Y. 121-131; Bostwick v. Van Voorhis, 91 N. Y. 353. The judgment should be affirmed, with costs and printing disbursements.
Putnam, J., concurs.