Firemen's Insurance v. McMillan

CHILTON, O. J. An escrow is defined to be “a conditional delivery of a deed to a stranger, and not to the grantee himself, until certain conditions shall be performed, and then it is to be delivered to the grantee.” — Bouv. Law Die., ‘Escrow’; Jacob’s Law Die., same title; 2 Rol. Abr. 25-6; Law Grammar, p. 537; Co. Lit. 31-36; 2 Bla. Com. 387; 1 Steph. Com. 459., When a deed is found in possession of the grantee, the presumption is that it was duly delivered to him. — 3 Maryland Rep. 67; 11 Geor. Rep. 636; 2 Mich. Rep. 390; 6 Missouri Rep. 326; 1 McLean’s Rep. 321; 5 Shepley, 391; 7 Iredell, 384; Houston v. Staunton, 11 Ala. Rep. 412; McMorris v. Crawford, 15 ib. 271. This presumption may be rebutted, by showing that the grantee obtained it surreptitiously or illegally; the burden of showing this being upon the party assailing the deed. 2. Although the earlier cases are not altogether uniform, the elementary writers, and the modern adjudged cases, are generally agreed that a deed cannot be delivered as an escrow by the obligor or grantor to the obligee or grantee. Such seems to be the doctrine of the American courts. — See Fairbanks v. Metcalf, 8 Mass. Rep. 230; Ward v. Lewis, 4 Pick. Rep. 520; Simonton’s Estate,4 Watts, 180; Jackson v. Catlin, 2 Johns. Rep. 259; Warrell v. Mann, 1 Seld. R. 229; Lawton — 161 — v. Sager, 11 Barb. Sup. C. Rep. 349; Johnson v. Branch, 11 Humph. Rep. 521; Graves v. Tucker, 10 Sm. & Mar. Rep. 9; Jordan v. Pollock, 14 Geo. Rep. 145; Dawson v. Hall, 2 Mich. (Gibbs’) 390; Fowley v. Cowgill, 5 Blackf. Ind. Rep. 18; Currie v. Donald, 2 Wash. Va. Rep. 58; 2 Lomax’s Dig. 29; Moss v. Riddle, 5 Cranch, 351; Shep. Touch. 58-9; Bl. Com. vol. 2, 307. But a deed may be delivered as an escrow, to any other person than the grantee or obligee. Thus, a bond for the performance of official duty, may be dejivered as an escrow to a co-obligor; and a constable’s bond may. be delivered as an escrow to the clerk of the county court. — Robertson v. Coker, 11 Ala. R. 466; Bibb v. Reid, 3 Ala. Rep. 88; McClure v. Colclough, 5 Ala. R. 65; Lovett v. Adams, 3 Wend. R. 380; So. Life Ins. & Trust Co. v. Cole, 4 Florida Rep. 359. We are unwilling to hold that a deed may be delivered to the grantee himself as an escrow, no qualification appearing upon the face of it limiting its effect. Such" conditional delivery would lead to incalculable mischief. Where fraud is alleged in obtaining the deed, this, we grant, may be shown by parol; but such is not the case before us. Whether there is such an identity between a corporation and its officers, as will prevent a delivery to one of the latter from operating as an escrow, is a question well worthy of consideration; but, since it was not raised upon the trial, nor discussed by the counsel, we decline to consider it at this time. See, however, upon this point, Life Ins. & Tr. Co. v. Cole, 4 Florida Rep. 359. Applying the principles of law above announced to the pleas in this case, it is clear that the second and fifth pleas, which fail to aver to whom the bond was delivered, are defective, — the presumption being that the same was delivered to the obligee. 3. But, although the court committed an error in overruling demurrers to these pleas; yet, we think, this error was rendered perfectly harmless, by the charge given, at the instance of the appellant, by the court to the jury, “that the evidence offered by the defendant on this point” (the delivery of the bond as an escrow) “being all in writing, and no conflict of evidence respecting it, the evidence is not sufficient in — 162 — law to prove that it was delivered only as an escrow.” Without intending to decide that it would be competent for the court, after having committed an error in forcing the plaintiff to take issue upon insufficient pleas, either mero motu, or upon request of the defendant, to heal the error by charges to the jury, we are of opinion, that when the plaintiff himself, against whom the.error has been committed, virtually withdraws the issues raised by the objectionable pleadings from the jury, (as upon a motion for instructions in the nature of a demurrer to the evidence, as applicable to such issues,) and the court, in compliance with his request, instructs the jury that the evidence, in law, does not sustain the pleas, he cannot be heard to complain that the court has held the pleas to be good; for we must presume that the jury conformed to the positive direction of the court, as to the legal insufficiency of the proof, and in this aspect of the case, the record affirmatively shows that the appellant sustained no injury. It is too well settled, by numerous decisions of this and other courts, to require the citation of the cases, that an error, which the record shows to have been harmless, furnishes no ground for reversal. This view renders it unnecessary that we should say more upon the subject of the conditional delivery of the bond by McMillan. 4. It is further insisted by the counsel for the appellee, that the other errors assigned upon the record are alike harmless, for the reason, that the record fails make out a prima-facie case against the defendant; affirmatively showing that there was “no evidence' distinguishing the amount of defaults (if any) done before and after the 10th July, 1850,” that being anterior to the delivery of the bond. There was some evidence tending to show default by Greene within the period covered by this bond. Whether it was sufficient to authorize the jury to find for the plaintiff, is not a question before us. If it tended to show defaults covered by the bond, however weak it may have been, the plaintiff had the right to have the jury pass upon it, and to make it the predicate for charges. If it failed to fix the amount of Greene’s defalcation, or to distinguish between defaults committed by him before and after the bond was executed; still, if there were defaults covered by the bond, we apprehend the plaintiff — 163 — would be entitled to recover a nominal sum at least; and in this view, he has such a standing in court as to claim a revision of its decisions adverse to him. If the entire record affirmatively shows that the plaintiff never can recover, and the matter which renders a recovery impracticable is obvious and undisputed, the court will not reverse, although the record may abound with errors, since i.t would do a useless thing. Brook v. Young, 4 Ala. Rep. 584; Marshall v. Betner, 17 ib. 836. The burden of proof is on the plaintiff; and the company must not only prove that Greene made default, in some matter falling within the legitimate scope of the condition of his bond, but that such default occurred during the period to which the bond applied. Nevertheless, this proof is for the jury ; and correct practice does not require the plaintiff to set out the evidence in his bill of exceptions, in order to revise the decision of the primary court, except so far as is necessary to put the court in error. 5. Addressing ourselves to the. consideration of the other questions raised upon the record, we come next to the third additional plea to the second breach assigned. The breach avers that, whilst the bond sued on was in full force, a large number of promissory notes and bills of exchange came to the possession of said Greene, as secretary of the company, the same being the property of said company, amounting to a large sum, viz., to the sum of one hundred thousand dollars ; that it was said Greene’s duty, as secretary of said company, to keep said notes and bills saiely, to deliver the same over to the plaintiff, and to account for them upon demand, &c.; that Greene, not regarding his duty as secretary as aforesaid, did not safely keep and account for said notes and bills, though requested by the plaintiff so to do, but, on the contrary, while he was secretary, and while the said bond was in full force, fraudulently embezzled said notes and bills, and converted the same to his own use. In reply to this, the defendant, by his third plea, says, “ that the plaintiffs have elected to treat said Greene as their debtor for the amount of the same,” (the said notes and bills of exchange), “ and have ratified the acts of the said Greene in reference thereto, by having waived the tort, and held Greene to answer for the — 164 — value of the same in money.” This plea was received in short, by the consent of the plaintiff. The demurrer concedes that the plaintiff elected to treat Greene as their debtor for the amount of the bills and notes, and has ratified his embezzlement and tortious conversion, by having waived the tort and held Greene to answer for the notes and bills in money. Had this action been against the persons who received from Greene the bills and notes, then it would have been competent for them to show, in bar of the suit, a ratification of Greene’s unauthorized acts in disposing of the property of the company to them ; for this would relate back, and make the act lawful. In such case, the authorities cited by the counsel for the appellee, would be in point. But this is not the case before us. Here, the plaintiffs say to the sureties, “ Greene has embezzled, and converted to his own use, notes and bills to the amount of $100,000 ; you have engaged, by your bond, to make good this loss to us.” Is it' any answer to this demand, for the surety to respond, “ True, as you allege ; but in consequence thereof, you have held Greene to answer for $100,000 as your debtor, and, by doing so, you have waived his wrongful conversion, and ratified his acts with reference to the notes and bills ?” It will be observed, that the plea contains no averment that the surety has been placed in any worse condition by the act of the plaintiff. It sets forth no contract or agreement, between the plaintiffs and principal, by which the obligation of the surety is changed, or in anywise affected. It does not even aver (a matter which, perhaps, in a court of law would not be available) that, by the ratification of the wrongful acts of Greene, the title to the converted assets has been confirmed to Greene’s transferrees, and that the assets are thus placed beyond the reach of the surety, who could otherwise have pursued them for his indemnity. The amount of the defense is, that the plaintiff, having a several remedy against Greene and his surety, has pursued one form of action (assumpsit) against Greene, and another against the surety. There being no change of the surety’s liability, no release of the principal, nor satisfaction of the demand, averred, the plea is manifestly bad, and the demurrer to it should have been sustained. 6. The appellee engaged, by his bond, that Greene should — 165 — discharge all the duties required of him as secretary of the company, “ according to the charter, by-laws and resolutions of said insurance company, now in force, as well as such other duties as from time to time may be required of him as secretary,” &c. By an arrangement between the plaintiff and the corporate authorities of the city of Mobile, the city taxes were paid over to, and deposited with the plaintiff; and said Greene was authorized, and required, by the president and directors of the company, to receive and keep the same, until they should be properly called for and paid out. This proof being made, the plaintiff offered to show that a large amount of money had been deposited with the company during the period covered by the defendant's bond ; but the circuit court held the evidence inadmissible, on the ground that the charter of the plaintiff did not authorize it to receive money on deposit. It is also here insisted, that the proof was properly rejected, upon the additional ground, that the declaration makes no charge of a default with respect to such fund. This last ground of rejection is untenable. If the company was the rightful bailee of the fund, it might well charge an embezzlement of it as of its own money, being responsible for its return. 7. As to the ground upon which the proof was rejected by the court, the charter is not before us, and we cannot therefore say whether or not the company could rightfully receive the money on deposit. If it did so without authority, it is very clear that the defendant would not be bound to make good Greene’s default respecting it. The surety has the right to stand upon the terms of his oontract. He is not liable for any default of his principal, in respect of matters without the scope of his principal’s legitimate duties, as presented by the charter, and the by-laws and regulations of the company made in conformity therewith ; and if the company engaged in business without the scope and purview of its charter, or which is expressly forbidden by the law of its organization, the surety cannot be considered as having entered into any engagement with reference to such business. It follows from what we have said, that if the circuit court was right in deciding that the charter of the plaintiff did not warrant it in receiving money upon deposit, the proof was properly — 166 — excluded. — McKay & McDonald v. Dodge and McKay, 5 Ala. Rep. 388. 8. The indictments against Greene were properly admitted, under - the limitation prescribing their effect as evidence. They were not, of themselves, testimony ; but the plaintiff had prosecuted Greene for embezzlement and for forgery,'— for embezzling what ? The indictment, prepared at the plaintiff’s instance by its attorney, answered, the notes and bills therein specified ; and so of the bond, with the forgery of which he was charged and convicted. . The indictment identified the subject-matter to which the admission, to be implied from the prosecution, had reference. We cannot readily perceive the bearing of such proof upon the issues ; but we cannot say from the record that it was wholly irrelevant. 9. We deem it unnecessary to notice the charges particularly, as some of them are involved, and we are not at all sure that we should arrive at the true meaning of the court in regard to them. As to the effect of the judgment against Greene in the city court,' his surety, McMillan, was no party to that suit, and is not in any way concluded by it. Indeed, if we understand the effect of the 12th charge, it makes its force as evidence depend entirely upon the proof de hors the record, showing that such judgment was predicated, in whole or in part, upon defaults of Greene covered by the bond; and this virtually, in one aspect, destroyed its force altogether. But it is insisted by appellant, that the judgment against Greene is •prima-facie evidence against McMillan, his surety, of the fact of embezzlement, and the amount by him embezzled. To this point, the learned counsel cites two cases from our own reports — Williamson v. Howell, 4 Ala. Rep. 693; and McClure v. Colclough, 5 ib. 65. The decision of these cases was rested upon our statutes applicable to them, and cannot therefore be regarded as authority indicating the common-law rule applicable to the case before us. He also refers us to the case of Drummond v. Prestman, 12 Wheat. Rep. 512, in which a judgment against the principal was received in evidence to charge the guarantor. It will be observed, that the judgment in that case was by confession of the principal. It was a voluntary undertaking on his part, of record, to pay the sum confessed to the creditor; and the guarantor, by his — 167 — letter of guaranty, stipulated to guaranty tbe conduct of bis son, tbe principal, and to bold bimself liable “for tbe faithful discharge of all bis engagements” to tbe plaintiff, “both now and in the future.” Tbe payment of this judgment, which the son had confessed, might, perhaps, have properly been regarded as one of “tbe engagements” tbe son bad entered into, within the scope, and covered by tbe undertaking of tbe guarantor, as contained in the letter of guaranty. If such be the extent of tbe guarantor’s undertaking, it is very clear, tbe judgment confessed by tbe son was not only prima-facie evidence, but, in the absence of fraud or collusion between him and the creditor, was conclusive against tbe father. It was upon this principle the cases in 4th and 5th Ala. Reports, cited supra, were made to turn. The statutes, upon a proper construction of them, made the sureties liable for the judgments rendered in those cases against the principals. So, also, in suits against bail, judgments rendered against the parties for whose appearance they made themselves answerable, are conclusive as to the amount of their liability. — Patton v. Caldwell, 1 Dall. Rep. 419. Unless, however, the decision of Drummond v. Prestman can be rested on the construction of the guaranty, as an undertaking to pay the judgment, and consequently an agreement to be bound by it, we venture to say, yet with the highest regard for the learning of the judges who delivered it, the decision cannot be supported as a correct exposition of the law. The case of the City of Lowell v. Parker, 10 Metc. Rep. 314, sustains the'view taken by the supreme court of the United States in Drummond v. Prest-irían ; but that case is based upon a misconception, in part at least, of the authorities relied upon, and is opposed to the current of authorities applicable to this point. — See them collated in Phil. Ev., C. & H. Notes, pp. 669, 816, 984; and 2 Amer. Leading Cases, by Messrs. Hare & Wallace, 184-188. The true rule is, that a recovery against the principal cannot be used as evidence to charge the surety, except in cases where the contract of the surety can be construed into an undertaking to be bound by the result of legal proceedings against the principal; and we apprehend, when the judgment is binding on the surety at all, it is conclusive, and not merely prima-facie evidence. There is, in our opinion, no middle — 168 — ground. — 4 Ala.- Rep. 69, per Goldthwaite, J. The surety is either a party, or privy, and bound by the judgment; or a stranger, and not bound. In the case before us, he falls within the second category, and the judgment is no evidence to charge him. In another aspect, however, the judgment may properly be received in evidence. It may be received in connection with proof that it was rendered for the same defaults of Greene now complained of in this suit, and that it has been paid or discharged, in whole or in part. We deem it unnecessary to discuss the other points raised in argument, as they may not arise upon another trial. For the errors we have- mentioned, the judgment must be reversed, and the cause remanded. RICE, O. J. The foregoing opinion, except the 4th paragraph, was prepared by Chief-Justice Chilton before he left the bench. The only material change we have made in the opinion as prepared by him, is the insertion of the 4th paragraph as it appears above, in lieu of the 4th paragraph as prepared by him. This change having been made, we adopt the foregoing as the opinion of this court.