Court Opinion

ID: 6837254
Source: CourtListenerOpinion
Date Created: 2022-07-23 20:08:04.624687+00
Date Added: 2024-06-11T16:04:44.370185
License: Public Domain

WOOLLEY, Circuit Judge
(dissenting).
Fearing that the judgment of the court will in a measure unsettle the law of suretyship, I am constrained to dissent. My reasons, shortly stated, are these:
The case came before the District Court as though on general demurrer to a narr. Therefore all facts well pleaded are admitted. The first fact is that Kondor was an official of the plaintiff beneficial order, charged with the duty properly to handle its funds; the next, that the defendant surety company assured the faithful performance of his official duties. Then follow two more: One, that Kondor violated his trust; the other, that the surety company thereupon became liable to the plaintiff for a large money loss. All these facts are definitely averred, for without them the plaintiff could hot make a ease, and without their admission by the demurrer there would bo nothing on which the court could base a judgment. For present purposes, these facts are established, The liability of the surety company became fixed when Kondor violated his official duties and loss occurred; and at the same time the surety company’s rights became fixed.
*34Then what happened? The plaintiff was confronted by the certainty of a substantial loss; that is, a loss substantially in excess of the amount for whieh it was protected by the surety bond. Kondor had withheld the plaintiff’s money and deposited it in his own bank, which was about to be closed by state authorities. It was Saturday night and the state authorities were going to act on Monday morning. That something should be done and done quickly was evident. Conferences of the plaintiff’s officers, local bankers and state officials were hastily called, the bank’s assets and liabilities canvassed, informal and incomplete estimates of the probable loss to depositors made and, eventually, a plan was proposed whereby another bank should take over and hold as its own the deposits of Kondor’s bank and pay all except the plaintiff’s very large deposit, which should be retained by the rescuing bank for four years without interest. Manifestly, the plaintiff was in a grave situation. It had, however, two ways out — one, acceptance of the proposed plan; the other, resort to the defendant’s bond — two opposite courses. Neither promised complete escape. It did not then occur to any one that the plaintiff could get out of the dilemma by traveling both paths at once. Legally and practically, that was impossible. Some one late that night phoned an agent of the defendant surety company and informed him of the problem. Neither the agent nor any one else connected with that company said or did' anything before Monday morning, by which" time the transaction was closed. Of this the plaintiff complains and the court makes a point. Yet neither the agent nor the surety company was bound to say or do anything, for that company’s rights and its duties and its liability had been fixed by previous events. Notice of the situation transmitted by phone, even if it had reached a responsible official, imposed no duty on the surety company to speak or act. A. B. Leach & Co. v. Peirson, 275 U. S. 120, 48 S. Ct. 57, 72 L. Ed.-, decided November 21, 1927. Responsibility for action was with the plaintiff alone. Responding to the sound advice of its counsel, the plaintiff on Sunday decided upon the course whieh then promised the greater naoney return and elected to forego (at least for a time) the protection of the defendant’s surety bond in the hope, eventually realized, of getting more money out of the plan of turning over its deposit to another bank for four years without interest. That entrance into this plan was a change of situation from that whieh would have existed if' the plaintiff had stood on the bond is another fact shown by the pleadings, for then both plaintiff and defendant could have resorted to the assets of Kondor’s bank and there would now be no occasion for the plaintiff to sue the defendant for the items of its present claim. It is in truth now suing for the particular loss which arose directly from the situation into which it had voluntarily entered. That this change, whereby the plaintiff’s deposit was tied up for four years without interest and all assets of Kondor’s bank were handed over to the other bank, precluded the surety company from resorting to those assets to cover or lessen the loss it might have sustained on its bond had it been called upon to perform is a fact clearly shown by the pleadings. The surety.company’s undertaking was not a contract of insurance, marine or fire, drawing in its train the law of salvage; it was a contract-of assurance. It contained no covenant even implying an obligation to make good a shortage in the bankers plan occurring four years later, but contained a covenant which expressly made it liable to pay for Kondor’s default at the time it occurred, and when it had done that the surety company had the right to be subrogated pro tanto to the plaintiff's right to recover from Kondor’s bank. Whether the amount whieh in such case it might have recovered would have been more or less than what the plaintiff now demands in this suit is beside the point. The fact remains the plaintiff by its conduct deprived the defendant of that right. I think the surety company should not be relegated to trial and forced to prove that the extension of time given by the plaintiff within whieh to pay the debt assured by the bond was a variation from the contract of surety-ship when the plaintiff itself has shown it. Nor should the surety company be required to prove that the variation was prejudicial in view of the plaintiff’s admission that this suit is brought to recover loss arising from that same variation, amounting to $41,600 for four years’ interest on the withheld deposit and for other amounts likewise directly and exclusively incident to the variation, such ■as interest for moneys which the plaintiff had. to borrow because of its withheld deposit, and expenses in the form of railroad fares, cost of meals and per diem fees of the plaintiff’s trustees while attending conferences, and fees of attorneys, amounting to $8,470 more.
Whether, on an issue of prejudice, it would appear that the defendant would actually have lost more if resort had first been made to its bond than is now demanded of it, and just how much more, is a matter that *35will, from the very nature of the ease, always remain in the realm of conjecture. It is difficult to prove the consequences of a thing that never happened.
I am strongly of opinion that, on the facts pleaded and admitted and viewed in the light of settled law, the judgment for the defendant should be affirmed.