Waterworks Improvement District of Ashdown v. Rainwater

Hart, C. J., (after stating1 the facts). It is first sought to uphold the judgment on the ground that the bond, by its terms, made the amounts deposited by the improvement districts in the bank payable on demand, and that the granting of the extension of the time of payment for one year by the commissioners constituted a new contract between the bank and the improvement districts which released the sureties on the bond. Wo do not agree with counsel in this contention. The body of the bond relating to this phase of the case is copied in our statement of facts, and need not be repeated here. Tt recites, in short, that the board of commissioners of the improvement districts had deposited with the bank funds belonging to said districts, Avhich the bank shall pay on demand, with interest on the daily balance. We are of the opinion that this language of the bond, when taken in connection with the bid, contemplated that there should be future as well as past deposits, which should be considered as one entire fund, and that it wa s the intention of the bond to secure the entire fund. The record shows that the funds already deposited and those deposited in the future at the end of one year after the bond was executed amounted to $4,000. This constituted the fund then on hand, after accounting for all deposits made from time to time and the items withdrawn by the commissioners during the course of the year. An agreement was made to extend the time of payment for another year and to issue what was called a certificate of deposit embracing the principal and interest. This did not amount to the execution of a new contract, but was merely an extension of the time of payment; and, there being no consideration for its execution, the sureties on the bond were not released. The clause of the bond undertaking that the bank should pay on demand did not use the word “demand” in the sense of a commercial instrument payable on demand, but it was used in the sense that the sureties on' the bond obligated themselves to pay back the amount deposited in the bank and not checked out by the commissioners when required by them to do so.. In other words, the'bond was given to secure the performance of the contract by the bank as a depository of the two improvement districts. The 'bank was rightfully in possession of the funds of the improvement districts, and was under no obligation to pay them over to the districts until so required or until demand was made by them to do so. That this is the sense in which the word “demand” was used will be seen by the reasoning in the case of Talley v. State, 121 Ark. 4, 180 S. W. 330. That was a depository case, and it is evident that, in this case as in that, the word “demand” meant that the depository was not required to pay over the funds until a demand was made on it for that purpose by the treasurer who was entitled to the funds. In this view of the matter there was no change or modification of the terms of the contract which would have the effect to release the sureties on the bond. Neither can it be said that the so-called certificate of deposit was a renewal of the original obligation for a definite period which had the effect to release the sureties because it was a change in the terms of the contract. As we have already seen, the certificate of deposit amounted to nothing more than an extension of time of payment of the amounts deposited, without any consideration for its execution. They were subject to be drawn out at the time the instrument was executed, and the mere indulgence of the bank for the period of a year without consideration did not have the effect to release the sureties on the bond'of the bank for the faithful performance of its contract to pay the funds upon the demand of the treasurer of the improvement districts. The result of our views on this branch of the case is that, under the facts, proved, the court should have entered judgment in favor of the improvement districts for the sum of $4,000 with interest at four per cent, per annum, as provided in the contract between the bank and the improvement districts. This brings us to a consideration of the item of $2,084.84 for' which a certificate of deposit was issued on April 9, 1924. The record shows that the items constituting this amount were a separate transaction from the $4,000, and was so treated by the parties. The amounts were not deposited until long after the execution of the bond, and were deposited as a separate transaction^ Hence the 'bond could in no sense be said to cover them. On this branch of the case, under the facts proved, we hold that there is no liability whatever on the part of the sureties. The court erred in not rendering a verdict in accordance with the views expressed in this opinion, and for that error the judgment will be reversed, and the cause - remanded for further proceedings according to law and not inconsistent with this opinion.