Peters v. Equitable Surety Co.

WHITE, C. The plaintiff recovered against the defendant as surety on an appeal bond, the judgment from which the defendant appeals. On March 12, 3912, the plaintiff obtained judgment against the St. Louis & San Francisco Railroad Company for five thousand dollars. From this judgment the — 322 — Railroad Company appealed to the St. Louis Court of Appeals, and gave bond in the usual form in the sum of $10,200, with this defendant, Equitable Surety Company, as surety. On November 4, 1913, during the next term of said Court of Appeals, the Railroad Company dismissed its appeal. The Railroad Company in the meantime, had been ordered into the hands of receivers. After the appeal was dismissed the plaintiff brought suit against the Surety Company, defendant here, upon the appeal bond. While that suit was pending, the respondent ran across a recent decision of the Springfield Court of Appeals holding that the dismissal of an appeal was not a breach of the bond in such case and would not make the surety liable. The plaintiff then filed a motion in the St. Louis Court of Appeals asking that court to set aside the dismissal of the appeal and reinstate the case. This was done at the same term of the court, on January 20, 1914, and on February 17, 1914, at the same term, that court affirmed the judgment of the circuit court for failure to prosecute the appeal. The plaintiff then dismissed the pending suit on the appeal bond, and filed the present suit, alleging as a breach of the bond the affirmance of the judgment and the failure of the appellant Railroad Company to comply with and perform same. The answer of the defendant in this case, in addition to a general denial, alleged that the defendant Railroad Company and the plaintiff, without the knowledge or consent of the surety, entered into a collusive agreement for a compromise judgment in the Court of Appeals, and that the appeal was dismissed by the plaintiff in pursuance of that agreement, whereby the surety was released from obligation on the bond. The answer further alleged that after the appeal was dismissed in the Court of Appeals, as mentioned, the plaintiff caused the same to be reinstated and the judgment of the circuit court to be affirmed, without notice of any kind to defendant herein, and if the judgment were enforced defendant would be deprived of its prop — 323 — erty without due process of law, and was in violation of Article 2, Section 30, of the Constitution of Missouri. The judgment of the circuit court was for $10,200, the penalty of the bond, with an assessment of the plaintiff’s damages at $5,000 and interest from the date of the judgment. On the trial of the case records were introduced to show the proceedings as above stated, and that execution had been issued and no part of the judgment had been paid. The defendant then .attempted to show the agreement set up in the answer. While the appeal was pending R. M. Nichols, attorney for plaintiff, and Mr. Lon Hocker, who represented the Railroad Company, had one or more conversations looking to a compromise of the case. Finally they agreed to settle the case for the face of the judgment and one-half the accrued interest and costs — the interest at that time amounting to $500 — the amount to be paid to plaintiff in the settlement being $5,250. It appears from the testimony of both Mr. Nichols and Mr. Hocker that in pursuance of the arrangement the Surety Company was to be consulted and requested to pay the amount agreed upon. The conversation in which this agreement was reached, according to the testimony of Mr. Nichols, took place on the 4th of November, 1913, and immediately, on the same day, Mr. Hocker dismissed the appeal in the Court of Appeals. The next day Mr. Nichols addressed a letter to the Surety Company relating the agreement and stating that Mr. Hocker had told him to write to the company and it would send him a check for the amount. After this letter was written Mr. Nichols had several telephone conversations with Mr. Geisinger, a clerk or bookkeeper in the office of the Surety Company, and with Mr. Maloney who, it appears, was the person in authority. Nothing came of the negotiations. Mr. Nichols for several days attempted to obtain an adjustment from the Surety Company, but without result, and then, on November 14th, ten days after the appeal was dismissed, — 324 — filed the first suit mentioned. After that he was informed by Mr. Maloney that inasmuch as suit had been brought he would let the law take its course. The appellant, to prove an agreement in this connection, had Mrs. Peters swear on cross-examination that she “agreed” to accept $5,250 in settlement. But the only agreement between the plaintiff'and the defendant Railroad Company was as to the amount the plaintiff was willing to take and the Railroad Company willing to request its surety to pay. It was understood that the Surety Company would have to be a party to the arrangement before it was complete. Defendant introduced as a witness Mr. Pierce, attorney for the Surety Company, who testified that when the matter was suggested to him by Mr. Hocker he objected and demanded that the case be briefed and argued in the Court of Appeals. In this statement he was corroborated by Mr. Hocker who, nevertheless, had proceeded to make the arrangement as mentioned. The motion which the plaintiff filed in the Court of Appeals, asking to have the order of dismissal set aside, set forth the arrangement between Mr. Nichols and Mr. Hocker as to the settlement of the case, stating in detail the negotiations between them, with a copy of the letter mentioned to the Surety Company; the failure of the surety to pay in accordance with the arrangement; and that the dismissal of the appeal, if allowed to stand, would endanger the plaintiff’s security on the appeal bond; that the plaintiff had relied upon the assurance of Mr. Hocker that the Surety Company would pay immediately the amount agreed upon. Appended to this motion was an affidavit showing that it had been served on someone in the office of Mr. Hocker. Mr. Hocker admitted the service of this motion. Affirmance! f°r I. The first error assigned by the appellant is to the refusal of the circuit court to give defendant’s declaration of law in the nature of a demurrer ^ie evidence, because, it is claimed, all the evidence showed that the Railroad Company failed to prosecute its appeal with' diligence by — 325 — reason of tlie compromise agreement between the jplaintiff and the Railroad Company, which agreement resulted in a material variance from the original undertaking of the defendant as surety. The authorities are conflicting as to whether a compromise agreement between the appellant and respondent for an affirmance of the judgment appealed from will release the sureties on an appeal bond. Many jurisdictions hold that such an agreement does not release the surety. [First State Bank v. Stevens Land Co., 119 Minn. 209; Howell v. Alma Milling Co., 36 Neb. 80; Ammons v. Whitehead, 31 Miss. 99; Drake v. Smythe, 44 Iowa, 410.] These cases hold that a surety on an appeal bond is not released by an agreement between the appellant and respondent for an affirmance of a judgment, although the agreement involves a variation from the original undertaking, such as an agreement to stay execution for a limited time. And, in cases where it is held that a surety is released by an agreement between the appellant and the respondent to have the judgment affirmed, with a modification of the original liability, it is held necessary that the agreement should be founded upon a good consideration and be of such character as to be binding upon the parties. Absent these elements the surety is not in any case released. [U. S. Fidelity Co. v. Boyd, 94 S. W. (Ky.) l. c. 37; Jacksonville, M. & P. Ry. & Nav. Co. v. Hooper, 85 Fed. 620; Quillen v. Quigley, 14 Nev. l. c. 217.] There is no view of the evidence in this case which could justify a conclusion that any agreement was completed. It was understood between the plaintiff and the appellant that the payment would have to be made by the Surety Company. Although they agreed upon the terms of a settlement, each one knew perfectly well that the agreement would result in nothing unless the Surety Company approved it and paid the amount agreed upon. The Surety Company perfectly understood this, because the letter of Mr. Nichols mentioned it and the subsequent telephone conversations explained the matter fully. The appeal was prematurely dismissed, according to the understanding between the parties; — 326 — it should not have been dismissed until the money was paid. It appears that Mr. Nichols, plaintiff’s attorney, didn’t know of the dismissal until he saw an account of it in the papers. There was no completed agreement binding upon anybody. There is another entirely sufficient reason why this dismissal didn’t prejudice the Surety Company and couldn’t release it; that is, it was set áside and the cause reinstated and left to stand just as it was before any agreement was attempted. The complaint of the appellant is that by reason of this alleged agreement between the plaintiff and the Railroad Company the company failed to prosecute its appeal and allowed the case to be dismissed. If appellant was in danger of injury by reason of that action, the danger was removed when the dismissal was set aside and the case reinstated and all parties restored to status .quo. instruction II. Appellant further assigns as error the refusal of the court to give declaration of law number declaring that if the appeal was dismissed pursuant to an agreement between the plaintiff and the Railroad Company then the plaintiff was not entitled to recover from the defendant. What has been said settles that assignment. There was no evidence upon which to predicate such an instruction. As indicated above, the evidence shows that no binding agreement was entered into. Notice ' III. Appellant makes no specific assignment of error to the effect that the plaintiff should have been non-s^ed because affirmance of the judgment was without notice to it and, therefore, was an attempt to deprive it of its property without due process of law, contrary to Article 2, Section 30, of the Constitution of Missouri. But inasmuch as the appellant argues' the proposition in connection with the first assignment, that the demurrer to the evidence was improperly overruled for another reason, we will consider it. — 327 — It is not claimed that the defendant here was misled by the proceeding in the Court of Appeals, nor that anything which the plaintiff did in that action was intended to have that effect, although it is stated in the answer that the application to have the order of dismissal set aside and the cause reinstated was without the knowledge or consent of the Surety Company, and that the affirmance of the judgment was likewise without its knowledge or consent. The Surety Company can have no cause for complaint in this connection unless the reinstatement and subsequent affirmance, without notice to it of this contemplated change in the situation, would be a violation of its rights under the Constitution. Some facts appear here which should have put the Surety Company on its guard if that were necessary in order that it might protect itself. It had full knowledge that the alleged agreement or understanding between the plaintiff and the defendant Railroad Company could not be carried out without its participation; it knew the attempted contract could not be executed unless it performed that act which would make it a binding agreement; and it knew that the dismissal in pursuance of that abortive agreement, whether to its advantage or disadvantage, was without any consideration moving to either party. “Whatever may be said about a surety being bound by an agreement between the principal and- a judgment plaintiff which varied the terms of the original obligation, the authorities seem to be uniform upon another proposition which settles this contention. A surety on an appeal bond “submits himself” to the acts of his principal, and to the judgment itself as a legal consequence within the undertaking of his suretyship. He is bound by the result in the usual course of procedure, whether that result be reached by an adverse ruling or his principal’s default. [2 Black on Judgments (2 Ed.), section 587; Bailey v. Rosenthal, 56 Mo. 385; Drake v. Smythe, 44 Iowa, 410; Nolan v. Johns, 108 Mo. 431, l. c. 437; Jones v. Mastin, 60 Mo. App. 578, l. c. 583; Calhoun v. Gray, 150 Mo. App. 591, l. c. 603.] Under these — 328 — authorities the - surety in signing an appeal bond voluntarily places “himself in privity with the principal,” and in the absence of fraud is concluded by any judgment following. He submits to the management of the ease by his principal. He cannot question the merits of a judgment, nor allege that it would not have been rendered “but for the fault or negligence of the principal.” [Drake v. Smythe, 44 Iowa, 410.] The Surety Company in this case had no independent right to appear in the Court of Appeals and conduct that case, and is not injured by the lack of opportunity to appear there. When it signed the appeal bond it submitted itself to the management of the case by the St. Louis & San Francisco Railroad Company and there was no stage of the proceeding, from that time to the end of the case, where there was any obligation on the part of the plaintiff to serve the surety with notice of any contemplated action. The defendant Railroad Company was the only party with whom the plaintiff had to deal in the conduct of the case or upon whom it was obliged to serve notice. Notice of the motion to set aside the order of dismissal was duly served on the Railroad Company. The order was set aside and the case reinstated. It stood then, and was pending' for nearly a month, in all respects as it had been in the first place, the defendant company having full knowledge of the situation. The surety then stood exactly as it stood in the first place, bound by the subsequent action of its principal. It had “submitted itself” to the control of its principal in the management of the case, and no additional notice was required to be served on it. Then if the Railroad Company afterwards failed to prosecute its appeal with diligence, and allowed the case to be affirmed without filing any brief or making any argument, that was one of the consequences included in the original undertaking of the surety; We are unable to find that the trial court erred in any'particular complained of. The judgment is affirmed. Roy, C., concurs. — 329 — PER CURIAM. — The foregoing opinion by White, C., is adopted as the opinion of the conrt. All of the judges concur.