Charlotte, Columbia & Augusta Railroad v. Gow

Bleckley, Judge. The action (commenced March 11th, 1874,) is by a corporation, the obligee in a bond, against the obligors, Wylly as principal, and Gow and another Wylly as sureties. The bond bears date November 21st, 1871, is in the penal sum of five thousand dollars, and the obligors are bound, jointly and severally, for the payment thereof; the obligation, however, to be void on condition that the obligor Wylly, (the principal,) shall well and faithfully execute, perform and discharge all the duties as agent of the corporation, and shall require all the freight charges and passenger fares to be paid in cash, and account to the corporation therefor daily, and transmit or pay over all money so received to the treasurer or proper officer of the corporation — said payments to be made daily — and deliver to all owners all goods, chattels or merchandize which may arrive, or be committed to .his care or charge, as agent at the Augusta — 693 — depot, or at any depot where lie may be placed in charge of business of the corporation, and collect freight charges according to the terms and rates prescribed by the corporation. The breaches assigned in the declaration are, that Wylly failed to well and faithfully execute, perform and discharge all the duties as agent of the corporation; that he did not require all the freight charges and passenger fares' to be paid in cash ; that he did not account to the corporation therefor daily, and transmit or pay over all money so received, to the treasurer or proper officer of the corporation, daily ; that he failed to collect all freight charges in cash, and transmit or pay over to the treasurer or proper officer of the corporation all money received from freights and passenger fares, but retained and refuses to account for six thousand dollars so had and received. Gow alone defended. He pleaded “ not indebted,” and that the plaintiff failed and neglected to enforce so much of the condition as required of the principal daily accounts of cash received, and daily remittances and daily payments to the proper officer of the corporation, and payment in cash for freight charges, but on the contrary allowed, consented to, agreed and required accounts and remittances at longer intervals, and consented to, agreed, and connived at the delivery of freights upon credit, without the consent or knowledge of Gow, whereby his risk was increased and he exposed to greater liability. There was a further special plea, but it was not insisted on. The evidence, as condensed by the reporter, will appear in the report. Most of the cases cited by counsel, as well as some others, we have examined. Special attention should be directed to Pittsburg, Port Wayne and Chicago Railway Co. vs. Shaeffer, 59 Pa. St., 350 ; Atlas Bank vs. Brownell, 9 R. I., 168; McKecknie vs. Ward, 58 N. Y., 541; Phillips vs. Foxall, L. R., 7, Q. B., 666 ; and Sanderson vs. Aston, L. R., 8 Exch., 73. While, from these authorities and those they refer to, we have derived much assistance, we have not considered that they rule for us the precise case before us. — 694 — 1. When the agent of a corporation, appointed for an indefinite time, is under bond to account and pay over daily, and he fails to perform for one day, or any number of days, whether he can be afterwards trusted with additional funds at the risk of the surety upon his bond, consistently with good faith and fair dealing, without first giving notice to the surety, depends upon the apparent cause of his failure. If the corporation, or its supervising officers, have reason to believe that it results from dishonest practices or intentions, such as a conversion of the money, or a purpose to convert it, no further funds can rightfully be committed to his custody. If, on the other hand, the circumstances do not point to moral turpitude, but to lax habits of business, mere negligence, procrastination, a want of diligence or punctuality rather than a want of honesty, the corporation may continue to trust him, treating his successive failures in promptness as breaches of contract only, and relying upon the bond for protection should ultimate loss occur. When a thief is detected, confidence ought to be withdrawn, at least until those who are likely to be injured by his larcenies have been warned. To persist in supplying him with money after he has made up his mind to steal, and you know it, is contrary to sound morality, unless you mean to bear the loss yourself. Considerations, not of contract only, but of crime, are involved. A question of honesty is raised, and honesty and equity are one. You cannot knowingly expose your own to the grasp of known dishonesty, at another man’s risk, he being absent and unwarned. To do so and make him bear the consequences, is to do, not equity, but iniquity. On the other hand, indolence, carelessness, inattention to business, want of promptness, a disposition to put off and procrastinate, are failings that, for the most part, stay outside of the penal Code, and may consist with moral integrity. Of such infirmities and their consequences, a surety may be supposed to have considered, once for all, when he entered into his contract. They are, so to speak, insurable, though hazardous, and the underwriter may be left to take care of himself. — 695 — When they furnish the apparent reason why money and accounts are not forthcoming at the time or times appointed, the case is not desperate, and business may proceed. Other explanations of delay may be consistent with honesty. In naming some, it is not meant to suggest that the enumeration is complete. 2. For the agent’s deviation in performance, from the terms of the bond, as set out in the condition, to be ground for the discharging his surety (except on the score of continuing the trust after known dishonesty), the deviation must be rightful and not wrongful. Wrongful deviation would be a breach of the condition, and, of course, would tend to hold the surety and not to free him. For a deviation to be rightful, it must rest, either on convention or on instructions. Any change of terms, by a new agreement between the corporation and the agent, being made without the surety’s consent, the surety would no longer be bound except to answer for a prior breach, if any had occurred. So, if without any new agreement, the agent be instructed by the corporation to disregard any of the terms of the condition favorable to the surety, and he does so, the surety is thereby discharged. Even a nudum pactum, acted upon and executed, would be effective as instructions from the corporation to the agent, and would work the same result. This is because the agent, though under bond, is to be guided by the will of the corporation, his master. Being subject to its orders, his obedience to its commands could not be a breach of his obligation. But care is to be taken, whether in the case of agreement or instructions, that the will of the corporation has been duly expressed or signified. Novation, to be recognized as such, must take place through an officer or agent having power to contract' in the premises on the corporate behalf. So, instructions must proceed from the officer or agent whose business it is to make known the corporate will in like cases generally, or in the particular instance by special authority. It will be unsafe to treat a new contract as existing, or certain instructions as duly given, without scrutinizing the — 696 — powers of those officers or agents concerned in the transaction. To group them under the designation of “ superior officers,” and there stop, will not be sufficient, unless the evidence shall warrant the inference of ratification by competent authority; as to which, see 18 Ga., 431, 432 ; 20 Ga., 276. Implied contract, or implied instructions, if clearly established, would have the same effect as express contract or express instructions. But the implication should' be absolutely necessary, under the evidence, and rise to such force as to be equivalent to open and direct expression. In dealing with so solemn an instrument as a specialty, its regular legal operation should not be varied by matters resting on inference, without great strength of conviction as to the precise matters alleged. We have now sketched the principles which we deem applicable to the case before us, in the light of the pleadings and the evidence. The surety is discharged if the corporation discovered dishonesty in the agent and after-wards entrusted him with more funds, without first giving some notice or warning to the surety; or if the agent deviated in performance from the conditions of the bond, rightfully ; which he could not do except by contract or under instructions, either express, or so plainly and certainly implied as to be equally definite and free from doubt as if openly and directly expressed. Of course, any discharge, by whatever means effected, would not operate retrospectively, so as to exempt from suit for breaches previously occurring. Notice of such breaches would not be necessary to perfect the right of action, or to preserve it throughout the period allowed for suit by the statute of limitations. See what is said upon the subject of notice in Wright vs. Shorter, 56 Ga., 77, 78. 3. It remains to consider the several points in the court’s charge to the jury, complained of in the motion for new trial. The exact language of the charge is quoted from the record: (a) “That if the jury find from the evidence that plain — 697 — tiff departed from the terms of the contract set out in the bond, by authorizing, or consenting to, or conniving at, the delivery of freights on a credit by Wylly, without the consent or knowledge of Gow, the surety, then the surety, Gow, is not liable in this action for losses resulting from such credit deliveries.” We think this paragraph of the charge erroneous, because the contract set out in the bond does not stipulate for anything inconsistent with a grant of authority, at the will of the corporation, to deliver freights on a credit. On the contrary, the agent undertook to collect all freight charges according to the terms and rates prescribed by the company. The terms were at the control of the corporation, and the agent’s duty was to obey instructions. Compliance with instructions would be compliance with the bond touching this part of his duty. After proving such compliance in making delivery and in efforts to collect after delivery, neither the agent nor his surety would be answerable for failure to collect. Losses which resulted from the terms, and not from neglect of the agent to carry them out, must be borne by the company. The chief objection to the paragraph is, that it misconstrues the contract, and puts the jury to looking for a departure where there could be none. So we think. (5) “In determining these questions of change of contract — consent—connivance, and authority, and knowledge of violations and breaches of contract, you will look to acts as well as words of parties — also omissions and silence of parties, and ascertain therefrom, and all other evidence, the conduct and intent of parties in relation to the matters in dispute,” adding thereto, “ and if plaintiff knew of such violation, and did not object, then assent may be inferred.” This part of the charge, except the concluding proposition, seems obscure. Perhaps it was plain to the jury, for they had it in its due order and connection. The silence of a corporation is not in itself a matter from which much can be inferred against it. Knowledge, attended with fail — 698 — ure to object, unless the jury should believe the circumstances called for objection, would be no basis for an inference. What facts will enable the jury to infer other facts, is generally matter for the jury to decide for themselves. Resides, a contract secured by atr agent’s bond ought to be kept until the corporation contracts to change it, or until the agent is instructed not to execute it. Why should the agent violate it, and take license, from the mere silence of the corporation, to repeat the violation over and over? The agent and the surety undertake that their bond shall be performed. The corporation is not bound to see to the performance as to matters which come clearly within the surety’s undertaking. (g) “Any change of the terms of the bond, without the consent of the surety, within the knowledge of plaintiff, or the superior officers of Wylly, by which losses accrued, cannot be chai-ged to the surety. Hence if the default of Wylly was by reason of non-payment of freights before delivery, or non-transmission of collections daily, with the knowledge, permission or consent of plaintiff, he is not liaable therefor, and your verdict should be for the defendant, Gow.” Mere knowledge of the corporation would not be sufficient to work discharge,'nor would that of the agent’s superior officers, as a class. What officers are referred to, and what are their powers and duties, would be material even if their knowledge would suffice. We have already said that a departure by the agent from the terms of the bond, unless known to be dishonest in act or purpose, would not discharge the surety, unless done by contract, or in pursuance of instructions. Any other departure would be simple breach of the bond, and instead of- being a reason for letting the surety off, would be the best of reasons for holding him liable and making him pay. (d) “ N o delay or non-action by plaintiff in compelling payments, or allowing freights delivered without payment, unless for a consideration or benefit to plaintiff, will discharge the surety, unless loss accrued thereby to securities — 699 — held, or it amounted to such conduct on the part of plaintiff as to so change the contract or bond as to increase the risk of the surety.” If the jury understood this paragraph, it probably did no harm. We think, however, it is too vague, and that it should be omitted when the case is tried again. • The vagueness is principally in the words “ such conduct,” and in the possible implication that delay or non-action might work a change in the contract. (e) “ If the maker, Wylly, permitted goods to be delivered without payment of freights, and loss accrued therefrom, and the plaintiff knew of such delivery without prepayment, the surety, Gow, cannot be charged with such loss.” This is undoubtedly erroneous. In the first place, it assumes that delivery without prepayment of charges would infringe the condition of the bond, though sanctioned by the company. This, we have said, is not our construction of the language of the condition. But if it would infringe the condition, surely knowledge by the company, especially without reference to the time of acquiring it, would not be enough to saddle the company with the loss. The truth is, that whether the agent or the company should be the lóselas to freight charges not collected, depends upon whether the agent complied with or violated his instructions. (f) “ One ^e requirements of the bond being that Wylly should make daily settlements, if the plaintiff permitted, allowed or consented to, weekly or monthly payments, and losses thereby accrued, the surety, Gow, cannot be charged therewith.” We think this was error. It would be quite right to permit all the payments, whether daily, weekly or monthly, that the agent would make. If the plaintiff, by contract or instructions, dispensed with daily payments, and authorized weekly or monthly payments in lieu thereof, the risk of the surety was increased, and he was discharged from that time forth. We will add that general orders, such as appear in the record, are not necessarily inconsistent with the condition of the bond. They stand to this contract somewhat as general statutes do to a particular — 700 — statute. It would be altogether practicable, and might be altogether reasonable, to have special regulations for the Augusta agency depending upon specific contract — such a contract as the condition of the bond sets forth. (g) “ This is a bond for the faithful performance by "Wylly of the duties of agent for plaintiffs, and in two of its most important stipulations, the manner of its performance specifically stated; any change of its mode and manner of performance by the agent, with the consent, knowledge or approbation of the plaintiffs, by which the risk of the surety was increased, or from which losses accrued, will discharge, and you should so find.” Omitting the word “ knowledge,” this paragraph may be deemed correct; but what will constitute consent or approbation should be squared with what has been said in reference to contract and instructions. Moreover, that discharge as to later breaches would not necessarily involve discharge as to earlier ones, should not be lost sight of. Cited for the corporation: 59 Pa., 350; 1 Am. R., 31; 46 Ga., 426; 33 Ib., 173, 184; 57 Ib., 433; 30 Ib., 249; 44 Ib., 12 ; 2 Metcalf, 176; 14 Barbour, 232; 46 Tenn., 263 ; 16 Maine, 72; 10 N. H., 162; 11 Ala., 523; 13 Ohio, 84; Code, §2154; 55 Ga., 374; 33 Ib., 173; 47 Ib., 273; 17 Am. R., 281; 8 Am. L. Reg., (N. S.) 110; 11 Am. R., 232; 58 N. York, 546 ; 4 J. B. Moore, 153; 37 Ga., 438 ; 55 Ib., 664; 21 Am. R., 608; Angell & Ames on Corporations, §321; 7 Curtis (U. S) R., 446, 454; 19 Am. R., 53; 2 Metcalf, 541; 18 Wallace, 662; Code, §2154; 55 Ga., 374, 664; 57 Ib., 433 ; 47 Ib., 273; 48 Ib., 489; 1 Am. R., 606. Cited for the surety: 3 Parsons on Contracts, 356; DeColyar on Guarantees, 432, 434; 17 Ga., 534 (3), (4); 52 Ib., 555; Code of 1873, §§2153-4; DeColyar on Guarantees, 276, 394, 396 ; 10 Ga., 235; 51 Ib., 205; 11 Eng. Com. Law, (5 B. & C.) 458; DeColyar on Guarantees, 324, 376, 385 ; Hunt vs. Roberts, 45 N. Y. Rep., 691; Phillips vs. Foxall, L. R., 72, B. 666, July, 1872; — 701 — McKeukie vs. Ward, 17 Am. R., 281; Atlas Bank vs. Brownall, 11 Am. R., 231 ; Pidcock vs. Bishop, 3 B & C, 605 (10 Eng. C. L.); 51 Ga., 205; 1 Greenleaf s Ev., §197; 1 Starkie’s Ev., 49, 50, 55-6, 61, 62; 1 Greenleaf’s Ev., §48; 55 Ga., 566; 18 Ib., 152; 53 Ib., 607 ; 20 Ib., 245 (8); 55 Ib., 438; 17 Ib., 99 ; Code, §2200 ; Bryan vs. Walton, 20 Ga., 480 (11 request), (12); 53 Ib., 144; 1 Gr. Evidence, 48; Story on Agency, §95 ; 41 Ga., 186; Statham vs. The State, 41 Ga., 507. Judgment reversed.