Court Opinion

ID: 9834533
Source: CourtListenerOpinion
Date Created: 2023-09-01 23:42:20.754648+00
Date Added: 2024-06-11T07:44:18.482079
License: Public Domain

*56On Petition for Rehearing. (December 5, 1935.)
The defendant Home Indemnity Company and the Individual defendants filed a stipulation showing settlement of this action and asked for a rehearing and at the same time for modification of the opinion to comport with the stipulation. From the stipulation, it would appear that the settlement was made largely because of the filed opinion. We cannot grant a rehearing for the purpose of dropping out of the opinion parts unsatisfactory to counsel and leaving in other parts evidently satisfactory to counsel. If the opinion is to be modified, it should be modified because it fails correctly to state the law, or for some other reasons which makes its language or statements improper or inapplicable. The petition for rehearing seems now to be moot, but since counsel vigorously contend that we have fallen into error in certain regards, we have reconsidered the opinion in the light of the assistance given by counsel in their briefs on the petition for rehearing in order to be sure that no incorrect statements of law appear.
It cannot be gainsaid that the appellant Home Indemnity Company, in its original briefs and in its brief on petition for rehearing, puts up a strong argument against the holding that it must be held liable in spite of specific language in the bond by which it intended and sought to exempt itself from liability for the failure of the county treasurer to account for public moneys by reason of the failure of his depository bank.
We took the position that section 1492, Comp. Laws Utah 1917, should be considered as reading “The treasurer and his official surety shall be liable on his official bond for the safekeeping of public monies.” Counsel for the appellant again call our attention to the cases cited in their original brief which hold that even if a statute requires an official bond to contain a condition and a bond is accepted which does not contain that condition, the surety is only liable to *57the extent to which it has actually contracted to be liable unless there is, in addition, a statute (called a remedial statute) which provides that regardless of whether the bond contains the specified conditions required by statute, it shall be considered as if such conditions were contained therein. No case has been cited to us wherein the language of the statute specifically read that an official surety shall be liable on an official bond for losses of a specific character such as for county moneys. When the Legislature in effect said the surety of the county treasurer shall be liable on its official bond for the safekeeping of public moneys it said more than is said by those provisions contained in some of the states wherein it is specified that the officer shall give a bond conditioned that he will faithfully discharge the duties of his office. The Legislature said an official surety shall be liable for the safekeeping of public moneys. This means exactly what it says, that a surety shall be liable in any event. If it becomes a surety, the law immediately attaches which says it shall be liable for the safekeeping of public moneys, and this regardless of what it may say in its contract.
If we take the very type of remedial statutes which counsel says is necessary in order to permit the court to read the bond as if it contained no exemptions, we find the effect of the language in those statutes no stronger than the effect of section 1492, Comp. Laws Utah 1917. In Indiana, the mandatory part of the statute (Burns’ Ann. St. 1933, § 3-25-12) reads as follows:
“But the principal and surety shall he bound by such bond, recognizance or written undertaking to the full extent contemplated by the law requiring the same, and the sureties to the amount specified in the bond or recognizance. In all actions on a defective bond, recognizance or ■written undertaking, the plaintiff or relator may suggest the defect in his complaint, and recover to the same extent as if such bond, recognizance or written undertaking were perfect in all respects.”
*58We deem this language no more efficacious for holding the surety liable as far as the safekeeping of public moneys is concerned regardless of exemptions placed in its contract than the language reading “the surety shall be liable on the official bond for the safekeeping of public monies.”
In Washington the statute (Rem. Rev. Stat. § 777) reads:
“No bond required by law, and intended as such bond, shall be void for want of form or substance, recital, or condition; nor shall the principal or surety on such account be discharged, but all the parties thereto shall be held and bound to the full extent contemplated by the law requiring the same, to the amount specified in such bond. In all actions on such defective bond, the plaintiff may state its legal effect in the same manner as though it were a perfect bond.” (Italics supplied.)
Both of these statutes make the parties liable to the full extent contemplated by law regardless of whether the bond contains the condition required by law. The language of our statute stating that the official surety shall be liable on the bond for the safekeeping of public moneys is just as strong as saying that it shall be held and bound to the extent contemplated by law, that is, to the extent of being responsible for the safekeeping of public moneys.
The Idaho statute (Code 1932, § 57-816) reads:
“Whenever an official bond does not contain the substantial matter or conditions required by law, or there are any defects in the approval or filing thereof, it is not void so as to discharge such officer and his sureties; but they are equitably bound to the state, or a party ine terested, and the state or such party may, by action in any court of competent jurisdiction, suggest the defect in the bond, approval or filing, and recover the proper and equitable demand or damages from such officer and the persons who intended to become, and were, included as sureties in such bond.” (Italics supplied.)
Here, again, the language “shall be liable for the safekeeping of public monies” is just as imperious a command that the surety’s coverage must be considered in law as coextensive with the treasurer in that regard as if it had been *59said “the official bond shall contain a condition that the treasurer and the surety shall be bound for the safekeeping of public monies and if the bond does not contain such a condition, the surety and treasurer shall nevertheless be liable.” This last is the effect of the Idaho statute and is the effect of section 1492.
The Iowa statute says the following:
“No contract, stipulation, or condition limiting the liability created by said bond shall be of any force or validity.” (Code Supp. Iowa 1913, § 1177-c)
The legislative mandate that the surety shall be liable on the official bond for the safekeeping of public moneys is equivalent to saying that it cannot by contract limit its liability in that regard, and that any stipulation, contract, or condition limiting the liability in that regard shall have no force or validity.
Summing up, as we stated in the original opinion, it is our opinion that section 1492, Comp. Laws Utah 1917, contains, by implication, the conception that the bond must provide for the safekeeping of public moneys, and that if it does not do so, the treasurer and the surety shall, nevertheless, be liable. While we do not deny a very good showing could be made for an opinion holding a different view, yet, we believe the conclusion to which we have come is the better reasoning, and therefore we adhere to the original opinion in that regard.
Counsel for the individual depositary sureties vigorously assail our opinion as respects subrogation. The appellant surety company thinks we are right with respect to our views in regard to its claimed right to be subrogated, but wrong in our interpretation of sections 1492 and 4310, Comp. Laws Utah 1917. The individual sureties, on the other hand, think we were right in regard to our interpretation of sections 1492 and 4310, but wrong in our conclusions *60to the effect that the official surety may be subrogated. For the reasons as stated above, both parties, including the treasurer himself, have joined in this petition for rehearing. In spite of the fact that the former opinion was very lengthy, counsel for the individual depositary sureties think we have not given sufficient consideration to some of the questions. They state that we departed from the stipulation of facts when we remarked, “In this case the depositary sureties not only knew that the deposit in their bank was illegal, but joined in securing such illegal deposit and induced it by giving the bond.” It is pointed out that the deposits were made in the bank under a depository bond for $5,000 given by the appellant long before these individual depositary surties executed their bond. If these individual sureties did not secure or induce such illegal deposit, they certainly secured or induced the continuance of the deposit, for the treasurer undoubtedly would not have kept the deposit in the bank without some depository bond. The treasurer continued to maintain and put in further deposits on the strength of the bond. Counsel can hardly complain, therefore, that the language is too strong, although we did not mean to indicate, as stated in counsel’s brief, that the individual depositary sureties had any sinister motive in so doing. What we intended to say in the opinion, and what we now explicitly say, is that when the individual sureties agreed to pay the treasurer up to $25,000 in case the bank failed to pay him on demand public deposits placed therein, they made a contract which was intended to be fulfilled, and if fulfilled would have placed in the treasurer’s hands that sum of money for which the official surety would thus not have been liable. The equities of the official surety and the individual depositary sureties are not equal. If A contracts to pay B moneys if C, who owes B does not pay him, A should be made to fulfill his contract without regard to the fact that if B cannot obtain them from A to pay D to whom the moneys really belong, a surety of B will have to pay D. A cannot relieve himself from his contract on the theory *61that he can make B’s surety pay D. The surety has the right to say to B, “Collect from A what A said he would pay and put yourself in possession of at least that much of D’s funds and I will respond for the difference. If you do not do so, the law will put me in your place and let me collect from A in order that I may to that extent recoup myself for the amount I paid D.”
An official surety agrees to respond for damages to the county due to failure of the treasurer safely to keep the public moneys, but where the treasurer has a security or recourse by which he may recover some of these public moneys, the official surety will be subrogated to that recourse. It seems to us the very statement of the propostion reveals the relative equities between the official surety and the depositary sureties and reveals the fact that their equities are not equal.
The depositary sureties claim we did not sufficiently consider the question of the appellant’s alleged negligence— really a claimed indiligence — in not compelling the treasurer, its principal, to obey the law. We think we made it sufficiently plain that the surety had no such duty, at least as far as the depositary sureties are concerned, to force the treasurer to take the county funds out of the bank where they illegally reposed so as to relieve the depositary sureties of the consequence of the obligation which they took to pay the treasurer if the bank did not. A says to B, “If you deposit money with C, I will pay you if C does not.” A is hardly in a position to say to B’s official surety, “You should have made B withdraw his deposit from C even though as an inducement to keep funds on deposit with C, I gave a depository bond, and since you did not do so, I, who have guaranteed B against loss from C, may resist your subrogation to be put in B’s place to recover from me, even though had I fulfilled my contract with B there would be no need of your being subrogated.” The consequences of the official surety’s indiligence, if any, were fully *62visited upon it and existed when it suffered by a matured liability. It may owe itself a duty to be diligent in order to save itself from loss, but it does not owe a duty to those who have guaranteed to pay if moneys illegally deposited in the bank are not paid over, to require such moneys to be withdrawn. Walker Realty Co. v. American Surety Company, 60 Utah 435, 211 P. 998, 1015, did not say it was the duty of the surety to see that its principal performed his contract, but that “it was to its interest to see that its principal performed its contract.” This is exactly as we stated in the original opinion. It is as if the depositary sureties were saying, “We guaranteed to pay the treasurer if the bank did not, but the monies were illegally deposited and we guaranteed that an illegal deposit would be repaid, however, you, Mr. Official Surety, should have been diligent enough to have insisted that the deposit which we guaranteed should have been withdrawn because you knew it was illegal and thus saved us from the situation in which we now find ourselves.”
In the original brief, the individual depositary sureties cited some excerpts from cases which, in effect state that where a person who claims the right of subrogation has been negligent, equity will not extend to him the benefits of the principle of subrogation. In our opinion we did not analyze these cases because we thought it was plain and clear enough that they did not apply in the instant case. They are all cases in that category where a person claims to be subro-gated to one having a prior lien because he has advanced money to pay off that lien. A subsequent lienholder moved ahead when the prior lien was discharged, and such subsequent lienholder contended that the person claiming the right of subrogation was negligent in not looking up the record before he paid over the money which discharged the prior lien. The courts in some cases so held, but we believe by the weight of authority even in such cases the person paying the money to discharge a lien with a promise that he would be substituted for that lienholder is not barred *63from subrogation because of an alleged negligence in failing to look up the record, especially where he relies upon the statement of the debtor that there are no subsequent liens. See Hughes Company v. Callahan, 181 Ark. 733, 27 S. W. (2d) 509; Kent v. Bailey, 181 Iowa 489, 164 N. W. 852; Home Savings Bank of Chicago v. Bierstadt, 168 Ill. 618, 48 N. E. 161, 61 Am. St. Rep. 146; Jackson Trust Co. v. Gilkinson, 105 N. J. Eq. 116, 147 A. 113; Emmert v. Thompson, 49 Minn. 386, 52 N. W. 31, 32 Am. St. Rep. 566; Hill v. Ritchie, 90 Vt. 318, 98 A. 497, L. R. A. 1917A, 731; Seeley v. Bacon (N. J. Ch.) 38 A. 139; Gore v. Brian (N. J. Ch.) 35 A. 897; Federal Land Bank of Springfield v. Smith, 129 Me. 233, 151 A. 420; Louisville Joint Stock Land Bank v. Bank of Pembroke, 225 Ky. 375, 9 S. W. (2d) 113; Merchants’ & Mechanics’ Bank v. Tillman, 106 Ga. 55, 31 S. E. 794; Fifield v. Mayer, 79 N. H. 82, 104 A. 887; Bormann v. Hatfield, 96 Wash. 270, 164 P. 921, L. R. A. 1917E, 1052; Geib v. Reynolds, 35 Minn. 331, 28 N. W. 923; Wallace v. Benner, 200 N. C. 124, 156 S. E. 795; Di Giovanni v. Giliberto, 139 Misc. 616, 248 N. Y. S. 82; Southern Cotton Oil Co. v. Napoleon Hill Cotton Co., 108 Ark. 555, 158 S. W. 1082, 46 L. R. A. (N. S.) 1049; Farm Land Mortgage & Debenture Co. v. Elsbree, 55 Kan. 562, 40 P. 906; Lanier v. Milliken, 25 Misc. 59, 54 N. Y. S. 424; Geo. A. Hoagland & Co. v. Decker, 118 Neb. 194, 224 N. W. 14; Miller v. Scott, 23 Ohio App. 50, 154 N. E. 358.
But in this case we have no such situation as the type of cases from which the excerpts in respondent’s brief were taken. It is one thing to say that equity will not grant the right of subrogation to one who has paid money on a promise that he will be substituted for a certain lienholder as security for the advancement of his money as against a subsequent lienholder when the person so advancing the money has been negligent in failing to search the record, but it is quite another thing for a depositary surety who has agreed to pay the treasurer moneys which the latter illegally deposited in a bank in case the bank does not pay him, to say *64to the official surety of the treasurer, “You have been in-diligent in permitting to remain in the bank illegally the very moneys the repayment of which we guaranteed.” In one case a subsequent lienholder who has not in any way been implicated in the transaction and who has no obligation to pay is permitted fortuitously to benefit as against one who pays off a prior lien because of the payor’s negligence in not searching the record before he paid over the money, whilst in the instant case the depositary sureties who have obligated themselves to pay in case the bank does not, are seeking to free themselves of the duty to pay by claiming that the official surety asking the court to permit it to pursue them should not be allowed to do so because it did not persist in requiring its principal to withdraw the moneys illegally deposited when they themselves had guaranteed that deposit.- The first case involves conventional subrogation; the latter and instant case legal subro-gation.
The respondent depositary sureties complain that we did not render any opinion as to the order of priority, if any, between appellant and the individual depositary sureties in regard to the bank’s assets after the plaintiff has been paid in full. We find no assignment of error by either party attacking the court’s finding in that regard. Nowhere in the briefs was it argued. We did state in the opinion to the effect that it was time enough to inquire as to the relative rights of the depositary sureties and official surety in reimbursing themselves from the assets of the bank after both had done their duty under their contracts. This was because we did not feel called upon by anything in the assignments to determine whether the depositary sureties would stand in the place of the treasurer against the bank if they paid the indebtedness of his debtor, the bank. We were called upon to determine whether the official surety was subrogated to the county or the treasurer against the depositary sureties. We had no call to determine whether the depositary sureties would be subrogated to the treasurer *65as against the bank if they paid so as to put them on an equal basis with the official surety for recoupment as against the assets of the bank. The fact that the official surety and the depositary sureties are not on the same level and that the equities are unequal between them when it comes to the question of whether the official surety should be subrogated as against the depositary sureties, does not necessarily affect the question as to whether if both the official surety and the depositary sureties respond to their obligations they may not be on an equal plane in recouping themselves from the bank. However, from the stipulation, it appears that the question is now moot and so need not be decided.
The fourth ground urged for a rehearing by the depositary sureties is that we were in error in holding that the official surety could stand in the place of the county as against the depositary sureties when the county’s right to recover was because a sovereign cannot be barred from collecting its own funds on account of its agent entering into an illegal contract. The contention is that the immunity which the county has from the rule that one who has entered into an illegal contract will not be given the benefit of the courts to enforce it, does not extend to the surety of the agent of the county where that agent has entered into an illegal contract. The error in this contention lies in the fact that the surety was not surety for the performance of an illegal contract. True, as stated in the opinion when A and B contract to do an illegal thing, neither A nor B can enforce or recover upon the contract, nor can the surety for the performance of it, nor an indemnifier of the surety recover from their respective obligors if they pay. All along the line, any one engaging or participating in or going surety for such contract may defend against enforcement or recovery on the ground of illegality. But a surety who guarantees the payment of a loss to the county or any other person because of failure of that person’s agent faithfully to perform, is not a party to, participant in, or surety *66for, an illegal contract. Because the method of failure to faithfully perform, causing a loss, involves illegality does not make the surety an insurer of an illegal contract, nor does mere failure of a surety to insist that its principal desist from the illegality make such surety a participant. That may be indiligence, the effect of which we have already considered. In this case the surety’s contract was not only legal, but required by law. The illegal act of the treasurer by which he committed a breach of his duty faithfully to perform his duties came after the surety’s contract. It was not the illegal contract of putting the money in the bank without the required legal safeguards which the surety guaranteed. The surety agreed only to make good losses regardless of whether they arose from neglect, bad judgment, or illegal acts. It would be quite inconsistent for the law to require an officer to obtain a surety for the faithful performance of his duties and then hold that if there was a breach of the faithfulness of his performance by his doing an illegal act, that the surety was a party and participated in such illegality and could not recover through subrogation. The difficulty with respondents is that they have confused a contract of a surety to pay a loss due to unfaithful performance whether by an illegal act or neglect and a surety who guarantees or insures'the doing of something which is itself illegal.
We find nothing in the petition of the respondent Farns-worth which has not been fully considered in the former opinion or which in any way points out error in that opinion. We have gone into this matter again somewhat at length because of the reason that if there were matters in the former opinion about which there was doubt, we thought it best to clear them up.
The petitions for rehearing are denied, and the former opinion is adhered to.
ELIAS HANSEN, C. J., and FOLLAND, EPHRAIM HANSON, and MOFFAT, JJ., concur.