National Surety Co. v. Arterburn

Opinion of the court by JUDGE DuRELLE Affirming. Appellee executed a deed of assignment for the benefit of his creditors to one Craig, w’ho executed bond with ap — 835 — pellant surety company as Ms surety. After rule and attachmentliadbeen issued against Craig in the county court to compel a settlement of his accounts, he brought suit in the chancery division of the circuit court for a settlement, and upon final hearing it was adjudged that he had in his hands as assignee, $750, for which he had not accounted, and judgment for that sum was accordingly rendered in favor of Arterburn. After execution and a return of nulla ~bona upon his judgment, Arterburn brought suit upon the bond against the surety company, seeking also to recover $238, the costs of the settlement suit, including attorney’s fees, but a judgment for which was refused in the settlement suit. A demurrer to that part of the petition setting up the claim for costs was overruled, as well as a motion to strike out parts of the petition, and the company answered, traversing the material averments of the petition, pleading res judicata as to the claim for costs, and that they were properly chargeable against the assigned estate. In a fourth paragraph the company pleaded that a notice had been served upon Arterburn after the bringing of the suit against the company to issue execution upon his judgment against Craig, and that the company was discharged from liability by his failure to sue out execution. In the fifth paragraph the company pleaded that at the date of the assignment Arterburn was solvent, and that the deed was made by him to hinder and delay his creditors; that Arterburn’s attorney was one of the attorneys of Craig in the settlement suit, and received a pairt of the amount allowed as attorney’s fees, with Arterburn’s consent;that Arterburn's personal attorney advised Craig in the management of the estate, and represented to him that his commissions would be larger than were allowed by the court, and that if Craig failed to — 836 — perform any duty imposed on Mm, Arterburn was aware of it, and failed to notify tlie company thereof; that, by reason of the purpose of the assignment, Arterburn was guilty of a fraud on his creditors, but for which Craig could not have become indebted to him; and that Arterburn was thereby estopped to prosecute the action. A reply was filed, and judgment rendered for the $750 upon a motion for a judgment for the amount not controverted. Various objections .are urged to the correctness of this judgment. The petition as to the $750 seems to us sufficient, especially in view of the fact that no demurrer was filed to that part of the petition; and, if not technically sufficient, we think it was cured by the answer. The notice pleaded in the answer was given under section 1668, Kentucky Statutes. It is not necessary to consider what would be the effect of such a notice if not complied with, in a case to which the section was intended to apply, as we are of opinion that it does- not apply to a case in which suit has been brought, or in which execution has been issued, against the principal. The defense of failure to notify, appellant company of a failure on the part of the principal to perform his duty can not apply ■to a case like this, where the breach of duty consisted, as appears from the petition, in failure to pay over the amount ascertained to be due in the settlement suit. The judgment complained of was rendered upon a motion for judgment for the amount not controverted, after notice, objection, and hearing. This motion raised the question of the sufficiency of paragraph 5 of the answer. It is obvious that, if the judgment obtained in the settlement suit against the' principal is conclusive upon the surety, the trial court ruled correctly upon this question. It would seem that the obligation assumed by the surety — 837 — upon the bond of an assignee for the benefit of creditors is strictly analogous to that assumed by a surety of a personal representative. The duties imposed by the law upon these two classes of fiduciaries are almost exactly similar. Each administers the estate committed to his charge pays the debts, and pays over to those entitled the surplus found to be due upon his settlement. That the surety of a personal representative undertakes that his principal shall pay over the amount so found to be due upon settlements has been uniformly recognized. And though by statute the express provisions to that effect which were anciently inserted in the bond are now no longer required, hut in lieu thereof the simple statutory form is substituted, — that the representative “will faithfully discharge all the duties of his trust,” — it can hardly be doubted that the payment of whatever is, upon settlement of his accounts, found to be due, is still regarded as one of the duties of the trust, and within the obligationsof the bond. And so the statutory bond provided for an assignee for the benefit of creditors, whose duties are almost exactly similar to those of a personal representative, is prescribed to be in the same simple form, — “conditioned for the faithful discharge of his duties as assignee,” — and should receive a similar construction. The doctrine as to the bonds of personal representatives is thus stated in Brandt, Sur., section 582: “A settlement made by an executor or administrator with, or judgment rendered against hiim in his official capacity by the court in which his accounts must be settled, is generally held to be con elusive evidence against his sureties of the facts thus established, although the sureties were not parties to, and had no express1 notice of, the proceedings. The reason for this rule is well illustrated by the following extracts — 838 — from opinions in cases where it has been held: £As a general rule, sureties upon official bonds are not concluded by, a decree or judgment against their principal, unless they have had their day in court, or an opportunity to be heard in their defense; but administration 'bonds seems to form an exception to this general rule, and the sureties thereon, in respect to- their liability for the default of the1 principal, seem to be classed with such sureties as covenant that their principal shall do a particular act. To this class- belong sureties upon bail and appeal bonds, whose liability is fixed by the judgment against their principal/ It has also been said that such ‘sureties are in many respects like the sureties of a bail bond, and are equally bound by the proceedings against the principal. The duty they have assumed is that their principal will pay on demand all debts ascertained by judgment of a court of law against him in his capacity of administrator, if the estate be solvent. His failure to make payment is a breach of the administration bond/ Again, it has been said: ‘The law has placed the sureties of executors and administrators on a different footing from other sureties and co-obligors in general. They are not liable on the administration bond until a devastavit is judicially established, and, as the question of devastavit is all that is controverted in the suit against the executor or administrator, the decision is conclusive, not only against the executor or administrator, but against the sureties also/ ” This doctrine is expressly recognized in the opinion by Judge Robertson in Hobbs v. Middleton, 1 J. J. Marsh., 179, in which it was said: “The responsibility of securities being incidental .and collateral to that of the principal, a judgment in favor of a creditor against the administrator concludes the securities as to the existence and character of the — 839 — ■debt thus -ascertained, and can not be questioned or reviewed in a suit on tbe official bond. As tbe judgment was against Hobbs as administrator, the securities, therefore, could not deny that he owed it as administrator.” In that case it was held that, by a statutory indulgence, both principal and sureties were entitled to plead no assets, or pleno admimistramt; but the general doctrine is amply recognized in the opinion, and we are cited to no authority to the contrary. It follows, therefore, that the trial court ruled correctly upon the motion, unless such action was precluded by the fact that thirty days had not elapsed since the making up of the issues of fact in the case, under section 1 -of rule 3 of the rules adopted by' the Jefferson Circuit Court. We do not understand that the rule in question, which is a provision prescribing when and how actions may be set on the trial docket, can have any application to a motion for judgment for an amount not ■controverted. But complaint is made that the appellant was misled to its prejudice by the court’s action in overruling a demurrer to the various affirmative paragraphs of the answer, and that it was error to give judgment against it after having held its answer presented a valid defense, without giving warning that the court would hold its answer did not present a defense, so as to give an opportunity to amend. In Moore v. Harrod (19 Ky. L. R., 406) (40 S. W., 675,) there had been two efforts to rectify an omission from the petition, but the court nevertheless decided the case against the plaintiff because of the omission. And in Ashbrook v. Roberts, 82 Ky., 298, the court permitted a pleading to be filed against objection, but disregarded it because it was not signed, and rendered judgment against the pleader. It was there said: “If the order filing the — 840 — amended answer had been proper, then the action did not stand for trial at that term; and, as it was improperly made, the court should have set it aside, or in some way notified the appellee that the pleading was insufficient, and given him an opportunity to amend it.” In that case the judgment was given in spite of a pleading which presumably set up a valid defense, because of the technical objection that it was unsigned, without any opportunity being given to correct the error. It seems to us that there is a material difference between that case and the case at bar, where by a motion which, under section 380 of the Code, may be made at any time, the sufficiency of the pleading was directly called in question, and the attention of the adverse party directed to that question. Had there been any attempt to file a sufficient pleading, a different question would be presented; but not only was no amendment tendered with the motion for a new trial, but no suggestion is made in argument that one could be made which would meet the objection on which the trial court decided the question. For the reasons given, the judgment is affirmed.