Case Name: Georgia Casualty Company v. Board of Directors of St. Francis Levee District
Court: Arkansas Supreme Court
Jurisdiction: Arkansas
Decision Date: 1934-03-26
Citations: 188 Ark. 1122
Docket Number: 4-3341
Parties: Georgia Casualty Company v. Board of Directors of St. Francis Levee District.
Judges: I am authorized to say that Mr. Justice McHaney concurs in the views I have expressed.
Reporter: Arkansas Reports
Volume: 188
Pages: 1122–1130

Head Matter:
Georgia Casualty Company v. Board of Directors of St. Francis Levee District.
4-3341
Opinion delivered March 26, 1934.
Sam Costen and House, Moses & Holmes, for appellant.
S. W. Ogan, J. L. Shaver and G. B. Segraves, for appellee.
James G Coston and J. T. Coston, for indemnitors— cross-appellants.

Opinion:
Humphreys, J.
This is an appeal by Georgia Casualty Company from a decree for $38,366 rendered against it in favor of appellee on an indemnity bond executed by it to appellee on March 18, 1930, agreeing to pay not to exceed $40,000 to appellee any loss it might sustain on account of deposits made in the Bank of Osceola, said bank being the principal in the bond and appellant the surety therein. Also an appeal by J. L. Williams, H. V. Cartwright, Ike Miller, and O. W. Knight from a decree in like amount rendered against them in favor of appellant on an indemnifying agreement to reimburse appellant herein for all loss it might sustain on account of the bond executed by it.
The issues joined by the pleadings were whether the bond sued upon by appellee had expired at the time said bank failed on December 17, 1931, and, if not, whether the bond was obtained through the fraud of appellant's own agent, in which fraud appellee participated; and whether J. L. Williams, H. V. Cartwright, Ike Miller, and W. O. Knight were released from their agreement or undertaking when the 'bond sued upon was extended.
The bond sued upon by appellee was executed on March 18, 1930, to expire March 18, 1931, in consideration of $5 a thousand or $200, which ivas paid to B. Frank Williams, the general State agent of appellant. Prior to the execution of this bond, the deposits of appellee were protected by indemnity bonds executed by the Southern Surety Company. J. L. Williams was president of the board of directors of St. Francis Levee District, appellee herein, and president of the Bank of Osceola. B. Frank Williams was his son, who was located in Little Bock in the bonding business, and represented appellant as its general agent in the State for the purpose of transacting all its business. He had a power of attorney from it which read, in part, as follows: "To make, execute, seal, and deliver for and on its behalf as surety, any and all bonds and undertakings, recognizances, contracts of indemnity and other writings obligatory in the nature thereof, which are or may be allowed, required, or permitted by law, statute, rule, regulation, contract or otherwise, and the execution of all such instruments in pursuance of these presents shall be as binding upon said Georgia Casualty Company, as fully and amply, to all intents and purposes, as if the same had been duly executed and acknowledged by its regularly elected officers at its principal office."
An application was made to appellant for a bond in the sum of $15,000 by appellee and said bank, but a bond was written for $40,000 to cover the deposits by the agent in the name of appellant, for which the agent was paid $200. He accounted to appellant for $75 premium only. At the time he wrote and delivered the bond to appellee, he also delivered his power of attorney to its secretary. On the same date the bond and power of attorney were delivered to appellee J. L. Williams, and the other directors of the said bank executed and mailed an indemnity agreement to appellant, referred to above. No amount was fixed in said agreement. In October, 1930, appellant wrote a letter to appellee stating it was surety on a $15,000 bond for it, and asldng for a copy of the bond. Appellee sent the letter to B. Frank Williams at Little Rock, but made no answer to the letter itself. In November appellant wrote asking B. Frank Williams for a copy of the bond, but failed to get it.
In February, 1931, before the expiration of the bond, appellee notified B. Frank Williams that appellant must furnish another bond in like amount or it would get a bond from the 'Southern Surety' Company. On the 26th of February, 1931, he furnished another bond in which the said bank .joined as principal and appellant as surety to expire February 26, 1933, and later extended the original bond to March 18, 1932, and afterwards changed the expiration of the new bond to February 26, 1932, and charged and collected a premium of $800 from appellee, which it seems was never sent to appellant.
There is testimony in the record tending to show that B.- Frank Williams violated the confidence placed in him by his company, and some tending to show that the officials of appellee participated in the fraud or had knowledge thereof, but there is other testimony tending to show that appellee had no such knowledge, and did not participate therein.
The chancellor found that both of the bonds sued upon were executed by B. Frank Williams, that the Levee District paid the premiums on both bonds, and that it had no knowledge or notice of the fraud practiced upon appellant by its own agent.
After a very careful reading of the testimony, we are unable to say that this finding is contrary to the weight of the evidence. The law is plain that, where one of two innocent parties must suffer on account of the wrongful act of a third party, the one must suffer who placed it in the power of the third party to perpetrate the wrongful act. Maccabees, Incorporated, v. Pierson, 177 Ark. 243, 6 S. W. (2d) 305. In the instant case, appellant placed it in the power of B. Frank Williams to perpetrate the fraud complained of, and must bear the loss resulting therefrom.
The only question now left for determination is whether, under the power of attorney, B. Frank Williams had authority to extend the indemnity bond by changing the date of expiration. Having power to execute the bond in the first instance without restriction as to amount or time and without submitting it to appellant for approval or confirmation, it follows that he might extend the time for any reasonable period. There is no restriction whatever in the power of attorney as to the amount or time for which it might be extended. He could have executed a new bond, and he actually did so, but later chose to extend the original bond. The power to extend a bond is necessarily conditioned upon power to make one for an unlimited time. A majority, however, are of the opinion that the power or authority to make or extend a bond does not confer authority to release a bond given to indemnify the surety against loss. In this latter view, the writer does not concur, being of the opinion that the power of attorney was broad enough to authorize the agent to do anything the officers of appellant might do.
The decree is therefore affirmed on both direct and cross-appeals.