Court Opinion

ID: 6314812
Source: CourtListenerOpinion
Date Created: 2022-02-18 20:24:11.9089+00
Date Added: 2024-06-11T08:59:13.173825
License: Public Domain

G-ibson, C. J.
The conclusion at-which a majority of the Court has arrived,-enables me to dismiss all the reasons for a new trial; *44but one, with a passing remark — that they have not been sustained. The point on which the cause is to be decided, and which was reserved at the trial, not only for its difficulty, but its importance both in principle and amount, arises out of the following facts: The bank was chartered in 1813, and its utmost duration limited'to the first of April, 1825. The bond on which suit is brought, was executed in 1814, with condition under-written, that Barrington should “well and truly perform the duties of cashier.” By the act of incorporation, the president and directors were re^ quired to pay annually to the treasurer of the commonwealth, six per cent, of the whole amount of the dividends; on failure of which ibr a, specified period, the charter was thenceforth to become “absolutely null and' void and of no effect whatever,” and the bank to be “dissolved, unlawful, and UNINCORPORATED,” except inasmuch as corporate capacity should be necessary to the enforcement of contracts made by it, or with it, before the period of its delinquency. By force of this provision, the charter became forfeited in the beginning of January, 1818; and by an act passed the second of February ensuing, was “revived and continued ip as full force and ample a manner as if no forfeiture had taken place.” The directors did not order new securities to be given by the officers; and nearly all the defaults of the cashier were subsequent to the act of restoration.
Whatever may have been the constitutional power of the Jegisr Jature to restore the defendant’s obligation without their consent, it certainly was not invoked. Provision was made for notes or bonds discounted or received subsequently to the forfeiture; but every thing else was left as it had been found, and the point is therefore to be decided on the principles of the common law.
The rule that the liability of a surety is commensurate in duration with the commission pf his principal, is well settled in the United States v. Kirkpatrick, 9 Wheat. 720, and the United States v. Vanzant, 11 Wheat. 184. The only apparent exception is the case of a direction to the proper officer to take a new security by a given day; which, in the United States v. Nichol, 12 Wheat. 509, was held not to discharge the old one. But there the continuance of the old security till it should be actually superceded by the pew one, was in perfect consistence with the original limitations of the contract; here the question is whether, by one of its limitations, the security had not .expired.
By the constitution of this corporation, its existence was subject to be terminated alike by forfeiture of the charier and efflux of time; and for the benefit of each of these as limitations of the term of their liability, the sureties had stipulated, not indeed in terms, but tacitly and by irresistible implication from the nature of the contract. They had treated on the basis of corporate existence as *45it then stood, and in reference to all its incidents. They might have seen, and they are therefore to be considered as having known, t.hat the bank was subject to cease by the happening of a contingency, and that with it would cease their liability. Who can say this did not enter into their estimate of the risk which they consented to take on themselves. They were, in effect, insurers, but without a premium, of the cashier’s fidelity; and they are entitled to the benefit of any termination of the risk which may be brought within the letter or the spirit of their contract. Their engagement was without a consideration beneficial to themselves, and it is therefore not to be extended beyond its strict technical import. That they, in fact, supposed their liability to be commensurate with the original charter, does not admit of a doubt; for no one will pretend that an extension of the charter would have operated as a .correspondent extension of the security. Such an extension might, in popular language, be a continuance of corporate existence; but as regards intervening rights, it would, in fact and in law, be a pew creation. Assuredly a .renewal of corporate powers extinguished by lapse of time, would not be a renewal of the sureties’ bonds, Arlington v. Merricke, 2 Saund. 411, and why should the same principle be inapplicable to extinction by forfeiture? It is the fact of extinction, and not the manner of it, which is material to the question. This is perhaps not denied; but the argument is, thafr.the legislature might waive the forfeiture, or at least avert it before the extinction was complete. Was it, however not complete as to all ,but new operations? For every thing beside, the bank had, in the words of the act of incorporation, become “dissolved, unlawful, and unincorporated.” Nothing was left it but a capacity to ;set its house in order. But the extinction of corporate existence, may be complete as far as it has gone, without being entire; and if the .office was gone as to ■pew operations, so was the liability of the sureties, so that to revive ■the security as to these, after it had ceased as to all but such as were necessary to close the business, would burden the sureties with responsibilities which had not entered into their stipulations, and bring the point within the principle of the United States v. Kirkpatrick, and the other cases of that class. The legislature might doubtless have interfered to prevent a forfeiture before one .had actually occurred: like medical assistance in the case of one whose life has been insured, that must be taken to have been a .tacit condition .of the contract. But it was as incompetent, had it been so disposed, to divest an interest .which was fixe.d by actual forfeiture, as it was to diyest an interest in the termination of the risk by lapse of time, which was fixed from the beginning. As limitations of corporate existence, the difference between expiration and forfeiture was, that the one was certain and the other *46contingent. But when the latter became certain by the happening of the contingency, all -difference ceased and the same rule was applicable to both. The legislature might have waived the forfeiture, had the performance of an act been necessary to take advantage of it;but, unfortunately for the argument, the divestiture of the corporate franchise was consummated by the bare omission.
So far the case seems clear on principle. But this construction of the contract is fortified by close analogies from undoubted authorities. In Wright v. Russel, 2 Blac. Rep. 934, security for the faithful service of a clerk to a sole trader, was not extended to a subsequent partnership. ■ I am aware that the principle of this case has been questioned, and perhaps with reason; although the ground of variance between the condition and breach as set out, on which it was ultimately rested, is admitted to be a tenable one. In Barclay v. Lucas, 1 T. R. 291, in note, a bond for the fidelity of a son whom the plaintiffs had taken into service in their counting-house and shop, was held not to be discharged by the introduction of a new partner. But Lord Mansfield put the case on a presumption of intention dedueible from the subject-matter of the contract — fidelity to a house, which might continue for generat-ions, by a-succession of partners under the same firm, though none of them should bearthe nameofan-y of the original proprietors; and also - on -public convenience which-required the security to be considered, as what it probably was intended to be — security to the house. Mr. Justice Willis considered it natural, that the service was to be performed in the counting-house, and not to the plaintiff in particular; and he thought the inconvenience there would be, in renewing -the security with every ehan-ge of the firm, must -have been in the-v-iew of the parties, and was therefore proper to be considered in expounding their intention: and Mr. Justice Bul~ lev, put the case on the same ground. But in Barker v. Barker, 1 T. R. 287 such a bond was deemed to be no security for the fidelity of a clerk retained in the employment of the obligee’s executor, who had continued the business pursuant to directions in the will; and this because the contract was in its nature exclusively applicable to services which were to be performed to the obligee, and not to hi-s successor, in perhaps an altered state of the business, produced by his death. Is not that, in principle, the case at bar, in which there has been a similar alteration by the civil death of the bank? Had this corporation, or any of the numerous family of which it was a member, acquired by repeated indulgence an ideal right to a remission of the forfeiture, that, like the ideal right to a renewal of a church or corporation lease which has sometimes entered into the consideration of a Court of Equity, might on the principle of Barclay v. Lucas, be fairly presumed to have tacitly *47entered into the stipulations of the parties. But there had been 'no instance of forfeiture and remission previous to the execution of the bond, nor has there been but one beside the present, since. The demise and resuscitation of a bank, under circumstances like the present,.are of no ordinary occurrence;.nor do they in the least resemble the coming in or going out of a partner which produces no change in the identity or individuality of the obligee, and which, from its frequency, must necessarily be in the contemplation of those who-treat in relation to the firm. The civil, like the natural death of the obligee, dissolves the obligation, although the business be continued on the old footing and under the same authority. The obligation perishes with the obligee; and being once discharged or suspended, it is gone forever. Even a voluntary suspension of the Remedy is attended with the same consequences. 20 Ed. 4, 17. 21 Ed. 4, 36. Dyer, 140. Hob. 10. Cro. Eliz. 150. Cro. Car. 375. Sir. W. Jones, 345. But the case of Dance v. Girdler, 1. N. R. 34, is nearer to the present than any of the preceding. There a bond to the trustees of an unincorporated association for the fidelity of one of its officers, was determined to be no security for his fidelity after the association had become incorporated, because its provisions were inapplicable to a state of corporate'existence, which, it was thought could not have been in the contemplation of the parties. Lastly, in Strange v. Lee, 3 East. 484, it was held that the death of even one of two or more obligees, determined the security.
It has been said that as both parties, here, proceeded on a supposition that the security remained good, their silence was a waiver of the forfeiture by themselves, to which they were undoubtedly competent. If however the bond was actually determined, I am unable to perceive how it could be set up again but by a new delivery; and although I will not say that fraud and imposition might not be left to a jury as. evidence of such delivery, yetas the case calls for no opinion on that point, we give none. The mistake, if any, as to the continuance of the security, was common to both parties, and their silence under it would not prevent them from standing on their original rights. ' The directors were bound to know that further responsibility by virtue of the bond, was at an end; and having in the absence of an intimation from the othér side, no reason to presume the existence of consent to its restoration, it was their business to put an end to uncertainty on this head, by g direct inquiry. Having omitted it, they must be considered to have taken the risk of the cashier’s future fidelity on the bank. But it has been pressed, that as the omission which caused the forfeiture, was a breach of his duty, the sureties are answerable for all the consequences of it, whether immediate and direct, or remote and consequential. Undoubtedly his negligence *48in this particular was a forfeiture of their bond; but what is the measure of the damages? Certainly the extent of the loss which it necessarily and naturally occasioned; not a loss occasioned by the plaintiff’s own negligence or ignorance. The directors were bound not only to know the law, but to take-all proper precautions; and if they failed to do so, the consequences are attributable to them, and not to the sureties, who are liable only for losses or expense incurred before the restoration of the charter, and which were occasioned by misfeasance or nonfeasance before the forfeiture of it. A new trial is awarded to enable the parties to ascertain the damages according to this principle, if that should be necessary, by another jury.
Huston, J. — Dissented.
Ross, J. — Took no part, not having heard the argument.
Judgment reversed, and a new trial granted.