Court Opinion

ID: 3910329
Source: CourtListenerOpinion
Date Created: 2016-07-06 09:39:06.873845+00
Date Added: 2024-06-11T07:42:35.121699
License: Public Domain

The trial court construed the bond sued on *Page 999 
as limiting the liability of the surety company to that proportion of the good roads money lost through default of the bank which the penal sum mentioned in the bond bears to the total amount of all the bonds and securities furnished by the bank as depository. And the appellant insists that the court erred in so construing the bond and in not awarding a recovery against the surety company for the entire amount of good roads money on deposit in the bank. The bond recites that the People's State Bank "has been designated as a depository for certain funds and moneys belonging to the obligee," and is conditioned that the said bank —
"promptly pay over on proper legal order such sums as shall have been deposited with it under the bond as the designated depository aforesaid, together with the amount of interest which it has contracted to any thereon."
According to the language of the bond the substantial engagement of the surety company is, in the event of the default of the bank, to repay to the county "such sums as shall have been deposited with it [the bank] under the bond as the designated depository aforesaid." The liability is thus limited to such moneys as shall have been deposited with the bank "under the bond as the designated depository aforesaid." By the word "aforesaid" reference is plainly made to the previous recital that the bank has been designated as a depository for "certain funds and moneys belonging to the obligee." These are the determinative words of the contract; and as the words "certain funds and moneys," and "such sums" thereof "as shall have been deposited with it [the bank] under the bond as the designated depository aforesaid" have reference to independent circumstances, it may not be said from the face of the bond itself that the surety company undertook at all events to repay any and all funds of the county that may be lost by the default of the bank. Thus the subject-matter of the contract and the main purpose of and the circumstances that led up to its execution are material to the ascertainment of the intention of the parties and the meaning of the terms they used and the scope thereof. It is the familiar rule of construction that, in order to arrive at the intention of the parties, the contract itself must be read in the light of the circumstances under which it is entered into. Indefinite terms employed in the contract, as here, may be thus explained or restricted as to their meaning and application, and the contract may be so construed as to give it such effect, and none other, as the parties intended at the time it was made.
Looking to the circumstances giving rise to the execution of the bond in suit it appears that the People's State Bank made application to the commissioners' court to be relieved, for reasons given, of being responsible as a depository of the county for —
"the particular funds arising from the sale of the $300,000 issue of good roads bonds recently voted by the county as shall exceed the amount of $69,935.20, the bank agreeing to give bond for the amount, desiring to serve as depository for such amount under its present contract with the county as its depository."
The commissioners' court granted the application, and by order directed the bank "to give a new bond and an additional bond in terms of the law in the amount of said additional deposit of $69,935.20 in some responsible guarantee insurance company." It was in compliance with this order of the commissioners' court requiring the bank to give a new bond and an additional bond "in the amount of said additional deposit of $69,935.20" that the bank undertook to execute a bond to cover such "additional deposit" with "some responsible guarantee insurance company" as surety. As a fact, it appears, the bank, in immediate compliance with this order, executed two bonds — each in the penal sum of $35,000, and each with a distinct and separate surety company as surety. By proper expenditure on the part of the county the $69,935.20 was subsequently reduced to $24,614.93. And the instant bond in the sum of $25,000 was then given by the bank and accepted by the county, and the two former bonds were canceled. The recital in the bond in suit that the People's State Bank "has been designated as a depository for certain funds and moneys belonging to the obligee" manifestly has reference by intention of the parties to this order of the commissioners' court requiring a new bond and an additional bond. And in the light of the application of the bank and the order of the commissioners' court in respect to it, the intention would clearly appear to have the bond apply to, cover, and secure only the good roads money. For the application of the bank asks to be relieved of, and offers to give bond for, such portion "of the particular funds" arising from the sale of the good roads bonds as shall exceed $69,935.20, and the order of the commissioners' court definitely required such new and additional to be "in the amount of such additional deposit of $69,935.20," meaning good roads money. Consequently it is believed that the words of the bond, "certain funds and moneys," were intended to refer to and describe only the good roads money as a limitation of the source or amount of money on deposit, and that the words "such sums as shall have been deposited with it [the bank] under the bond as the designated depository aforesaid" were intended to mean and have application only to the good roads money. In this construction of the bond, as by intention of the parties that the bonds covers and secures only the good roads money on deposit in the bank under the bond, the question remains only of whether or not the court correctly awarded a recovery against the surety for only $8,204.97 instead of the whole amount of $24,614.93.
The bond contains the following proviso:
"The surety hereon shall be liable hereunder for only such proportion of the total loss sustained as the penalty of this bond shall bear to *Page 1000 
the total penalties of all bonds and securities furnished to the obligee, and in no event shall the surety hereon be liable hereunder in any sum in excess of the penalty of this bond."
The evidence is without dispute that the bank as a depository executed a general bond to appellant in the sum of $50,000, in terms of the statute, covering "all the funds of said county," and that this bond is in force and effect. The language of the proviso is plain and unequivocal, and can bear but one construction. It shows a contractual arrangement between the surety and the obligee limiting the liability of the surety, in the event of the default of the principal bank, to such proportion of the total loss sustained by the obligee as the penalty named in the bond bears to the total amount of all bonds furnished by the principal bank to the obligee. And the bond is not by its terms a statutory bond of a county depositor. It is purely a common-law obligation. The bond being a common-law obligation, and not a statutory bond, it may not be said, it is believed, that the surety company did not have the legal right to make a valid and enforceable contractual stipulation, as here, between it and the obligee, limiting its liability, in the event of the default of the bank, to a fractional part of the total loss due to the default of the bank.
It is concluded that the trial court did not err in the judgment rendered, and that said judgment should be affirmed, and it is accordingly so ordered.