Court Opinion

ID: 6602551
Source: CourtListenerOpinion
Date Created: 2022-07-20 20:09:03.14817+00
Date Added: 2024-06-11T15:58:04.171841
License: Public Domain

LyoN, J.
The covenant of the obligors in the bond in suit, *488in respect to the past indebtedness of the bank, is something more than a mere covenant of indemnity. Yet it is not an absolute covenant to pay the whole of such indebtedness, but only the balance thereof after deducting the assets and the collections and credits specified in the bond.
It is charged, generally, in the complaint, that the obligors have failed to perform any of their covenants contained in the bond, by reason whereof Ackerman, the trustee, and the stockholders, have been compelled to pay large sums to cancel the indebtedness of the bank, and have suffered loss thereby to the amount of the penalty of the bond. The complaint fails to state whether the trust has or has not been fully executed, or the amount of the past indebtedness of the bank chargeable to B. B. Hills, or the amount of credits to which he is entitled pursuant to the condition of the bond; and it fails to give any data by which the amount actually due on the bond (if anything is due thereon) can be ascertained. Neither does it satisfactorily appear from the complaint that the credits to which L. B. Hills is entitled under the covenant in the bond are not equal to the past indebtedness of the bank chargeable to him.
The averment that the new stockholders have been compelled to pay the past indebtedness of the bank, is not equivalent to an averment that the obligors are in default upon their bond. The means in the hands of the trustee for that purpose may have been ample to pay all such indebtedness, and the credits to L. B. Hills on the books of the bank may equal the indebtedness of the bank chargeable to him by the terms of the bond, and yet the trustee may not have paid such indebtedness. In such case the stockholders might be held liable therefor, and compelled to pay it, without any default of the obligors.
The averment t]jat the obligors “ have failed to comply with the terms of said bond and the conditions of said mortgage, by omitting to pay the same or any part thereof, or to perform any of the agreements therein contained,” has no significance *489until it is made to appear that there is a balance of the old indebtedness of the bank remaining unpaid, which the trustee has not realized out of the assets provided for that purpose.
Unless the obligors are in default on their bond, this action cannot be maintained; and hence, if they are in default, the fact should be directly alleged in the complaint. Moreover, it is not alleged that the trust account has ever been adjusted, and the balance ascertained. In the absence of such adjustment, before any judgment on the merits can be rendered in the action, there must necessarily be an accounting in respect to the trust transactions, to ascertain the sum actually due on the bond. "We think the complaint should furnish some data for such accounting. Because the complaint is wanting in averments material to the right of action, it is demurrable.
Whether the trustee could lawfully assign the bond and mortgage, or whether there is a defect of parties to the action, we do not determine. Before passing upon these questions, we ought to know what has been done in execution of the trust.
By the Gourt. — Order affirmed.