Court Opinion

ID: 3495400
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:03:12.517314+00
Date Added: 2024-06-11T13:55:50.732159
License: Public Domain

Plaintiff sued defendant to recover upon a bond executed by it as surety for the First National Bank of Reed City to plaintiff given December 28, 1928, to be in force from January 1, 1929, to January 1, 1930; subsequently renewed for 1930 and 1931 in accordance with the terms of the bond. From a judgment for plaintiff, defendant appeals. Plaintiff's declaration is on the contract of suretyship and the common counts. The defendant admits the bond was in force for the years 1929 and 1930 and for 1931 up to the time it alleges it canceled the bond. The bond contained a provision:
"This bond shall be deemed canceled at the close of business upon the effective date set forth in a written notice served by the surety upon the obligee or by the obligee upon the surety, or sent by registered mail. Such date shall, in case of cancellation by the surety, be not less than five days from such service, or if sent by registered mail, not less than 10 days from the date by the sender's registry receipt. In case of cancellation the unearned premium, if any, shall be returned upon demand."
Under date of September 16th, defendant served upon the county clerk of defendant county a notice of cancellation as follows: *Page 11 
                                      "September 16, 1931 "Copy for the information of "First National Bank, "Reed City, Michigan.
"MR. ALF ZIMMERMAN, "County Treasurer, "Reed City, Michigan. "Dear Sir:
"Notice is hereby given that the Michigan Surety Company has elected to and does hereby cancel and terminate and withdraw from liability as surety under its bond No. 14,607, dated December 28, 1928, and effective January 1, 1929, in the sum of $20,000 on behalf of the First National Bank of Reed City, Michigan, and all continuances or renewals of said bond, which said bond was in favor of the county of Osceola and was given for the protection of funds of the county deposited in said bank.
"This cancellation and termination and withdrawal is effective five days from the date of the service of this notice upon you and is pursuant to provision therefor contained in the seventh paragraph of said bond, lines 45 to 50 inclusive.
"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. 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.
"The First National Bank is a depository for a number of school districts in the vicinity of Reed *Page 12 
City, and the statutes require the school districts' depositories furnish security to said districts. At the present time depository bonds are difficult of procurement and the bank wishes to reduce the bond covering county funds from $20,000 to $10,000 so as to make it possible for us to execute these several depository bonds to various school districts, for which it is depository. This, then, is the particular reason for the reduction in bond covering county funds. Immediately following the 23d instant, we will execute and forward to the bank the several bonds covering school districts' funds. We make this explanation so that the cancellation and substitution of reduced bond will not be misconstrued.
"This notice is served upon you by messenger and we ask that you favor us with an acknowledgment of its receipt by signing the inclosed copy.
                              "Very truly yours, "MICHIGAN SURETY COMPANY
"WHL.WH   (Signed)   By WALTER H. LEWIS "Vice-president
"Receipt of the above and foregoing cancellation notice is acknowledged this 17th day of September, 1931.
                           (Signed)   "ALF ZIMMERMAN, "County Treasurer."
This notice is a notice defendant has elected to cancel the bond; that it does cancel it; that it terminates and withdraws from liability as surety thereon; that the cancellation and termination is effective five days from the date of service of this notice. The date of service was acknowledged to be September 17, 1931. A bond for $10,000 was tendered by the surety company in the place of the canceled bond. This $10,000 bond was not accepted. The bank closed October 2, 1931. The cancellation was in accordance with the terms of the bond. *Page 13 
The question is whether defendant is liable as surety on this bond. Prior to the execution of the bond, the First National Bank of Reed City had been regularly designated by the board of supervisors of Osceola county as a depository for county funds. The bond was furnished by the First National Bank of Reed City in pursuance of such designation and was accepted and approved by the board of supervisors of the county. The real question is, Is the cancellation clause of the bond above quoted valid? Plaintiff contends it is invalid; defendant that it is valid. In 1909 the legislature provided banks might compete for the deposit of county money. The bank or banks bidding the highest rate of interest to the county were to be awarded by being designated as county depositories. They were to give bonds to indemnify the county. Thereupon it was made the duty of the county treasurer to deposit the money which came into his hands as such, with some exceptions, in such designated depository or depositories; the statute providing, if he did so, the county treasurer, in the absence of his own negligence, should not be liable in case the depository suspended payment. What kind of a bond was to be given to the county by such designated depositories?
Such bond —
a. was to be executed and delivered to the board of supervisors of the county;
b. in an amount at least equal to the maximum amount to be deposited in such bank;
c. with such sureties as should be approved by the board of supervisors and the prosecuting attorney of the county;
d. conditioned for the safekeeping and repayment of such moneys or any part thereof on demand and the payment of interest. *Page 14 
e. Such bond, "shall contain such other conditions as may be required by the board of supervisors * * * not inconsistent with the provisions of this act." 1 Comp. Laws 1929, § 1195.
It is, by statute, made the duty of the board of supervisors "to fix and determine the amount and kind of said bond and the class and character of the surety executing same." 1 Comp. Laws 1929, § 1194.
The board of supervisors may require new and additional bonds of security from the designated depository or depositories. 1 Comp. Laws 1929, § 1197. The board of supervisors may direct the county treasurer to withdraw county funds from any designated depository whenever it shall deem it unsafe to continue said deposits with any such bank or banks. 1 Comp. Laws 1929, § 1198. The statute provides for the release of sureties on depository bonds. 3 Comp. Laws 1929, § 12420. If the surety on a depository bond may be released by law, they may be released by agreement between the parties. The provision in the bond in question providing for the release of the surety thereon from liability must be construed as one approved by the board of supervisors and under 1 Comp. Laws 1929, § 1195, and valid in accordance with its terms.
The board of supervisors doubtless read the conditions, stipulations, and limitations in the bond in question, accepted and approved the bond containing them, and the county must be held to be as much bound by the contract entered into as the surety company. Mayor and Council of Brunswick v. Harvey,114 Ga. 733 (40 S.E. 754). Suit in this case is not brought entirely upon the original bond. It is brought upon the original bond as renewed for 1930 and 1931. Such renewal is a new and distinct contract, *Page 15 
keeping the original bond in force by reference and incorporation in the renewal agreement. 1 May on Insurance (4th Ed.), § 70a; Ostrander on Fire Insurance (2d Ed.), § 344; Richards on Insurance (2d Ed.), § 156; 4 Joyce on Insurance (1st Ed.), § 3485; Mayor and Council of Brunswick v. Harvey,supra. The terms and conditions of the bond in question, ratified and approved by the board of supervisors, including the clause providing for its cancellation, is such a bond as the county, through its board of supervisors, was authorized to take; the parties are bound thereby; the cancellation was regularly made. Upon the cancellation being made the board of supervisors did not direct the withdrawal of the county funds from the designated depository, and defendant is not liable.
It is suggested defendant should have tendered back the unearned premium upon giving notice of cancellation of the bond, which provided in case of cancellation for a return of the unearned premium on demand. Notice of cancellation was given in accordance with the provisions of the bond. A different bond was tendered. Defendant said if it was accepted appropriate adjustment of the premium would be made. The notice of cancellation was good without an actual tender to plaintiff or the bank of the unearned premium (Home Ins. Co. v. Curtis,32 Mich. 402; Metropolitan Life Ins. Co. v. Freedman, 159 Mich. 114
[32 L.R.A. (N.S.) 298]; American Fidelity Co. v. R. L.Ginsburg Sons' Co., 187 Mich. 264; Molyneaux v. RoyalExchange Assurance Co., 235 Mich. 678; Beaumont v. CommercialCasualty Ins. Co., 245 Mich. 104), in accordance with the general rule in this country (3 Joyce on Insurance [2d Ed.], pp. 2557-2630), and in England (17 Halsbury's Laws of England, pp. 495-499). *Page 16 
"It is competent for the parties to stipulate that under certain conditions or the happening of some event, or the not happening of a specified contingency, a part of the premium shall be returned. Such stipulations may lawfully be, and should be, inserted in the policy, or otherwise made a part of the contract, and when so made are enforceable." 3 Joyce on Insurance (2d Ed.), p. 2561, § 1391.
Where the condition of the bond is substantially that required by the statute, the fact that it contains further undertakings does not take the bond out of the statute.
"It has been frequently held that, in the absence of a prescribed statutory form, and of a declaration that bonds not in accordance therewith shall be void, if a bond be taken under a statute, with a condition in part prescribed by statute, and in part not so prescribed, yet, if it be clearly divisible, a recovery may be had upon it for a breach of the part prescribed by statute. The superadded part may be rejected as surplusage."Board of Education of Detroit v. Grant, 107 Mich. 151.
The bond in question does not fall within the class of bonds under consideration in the case last above cited. Certain conditions of the bond are prescribed by statute. The form of the bond is not so prescribed, nor is there any declaration in the statute that bonds not in accordance with the statute shall be void. The statute prescribes certain conditions, and that the bond may contain other conditions required by the board of supervisors. That is, conditions which may be agreed upon between the surety and the board of supervisors.
"A statutory bond may be good as a common-law obligation, although insufficient under the statute because of noncompliance with its requirements, provided *Page 17 
it is entered into voluntarily and on a valid consideration and does not violate public policy or contravene any statute. But this rule cannot be extended to cases in which to hold the parties liable as on a bond at common law would be to charge them with liabilities and obligations greater than, or different from, those which they assumed in the instrument executed by them." 9 C. J. p. 27.
The rule of the text above quoted has been repeatedly recognized and acted upon by this court. St. Joseph CountySupervisors v. Coffenbury, 1 Mich. 355; People, for use ofClinton, v. Laning, 73 Mich. 284; Lustfield v. Ball, 103 Mich. 17;  Board of Education v. Grant, supra; Buhrer v.Baldwin, 137 Mich. 263; 9 C. J. p. 27.
The parties to this bond, under any circumstances, are bound by the words of the instrument. If the words do not make the surety thereon liable, nothing else can. There is ordinarily no construction of an instrument which is plain in its terms. There is no equity against sureties. The bond is to be enforced in accordance with its words. This court has no power or authority to write into the bond terms and conditions not contained therein, and it has no power and authority to eliminate therefrom other conditions than those expressly named in the statute, which, by the terms of the statute itself, the board of supervisors and the surety may include therein. The surety in question is a paid surety. The general rule of construction is that a noncompensated surety is only to be held liable in accordance with the strict terms of the contract. Spencer on Suretyship, § 259; Arnold, Suretyship and Guaranty, § 232; Pingree, Suretyship and Guaranty (2d Ed.), § 442. A more liberal rule of construction applies to compensated sureties, but though the surety involved is a compensated surety, that does not authorize the *Page 18 
contract to be construed otherwise than in accordance with its terms agreed to by the surety in its execution of the bond and ratified and approved by the board of supervisors of the county. Whether we consider the bond in question as strictly a statutory bond, or as a common-law bond, defendant is not liable.
Judgment should be reversed, with costs.
McDONALD, C.J., concurred with POTTER, J.