National Surety Co. v. Blumauer

HUNT, Circuit judge (after stating the facts as above). [1] The vital question in the case is whether the indemnity agreement was effective in September, 1914, when the bank failed. The answer can only be had by arriving at the actual intent of the parties, as it is to be deduced from every part of their agreement. It is very clear that the purpose of the bank was to secure to itself the advantáge of being made a depository of public funds which might come into the hands of the county treasurer. To carry out .the purpose, the bank, through its president and cashier, applied to the surety company for a bond, which by the state was necessary to be given by a depository of public moneys. The obligee was to be the treasurer of the county. The surety company agreed to make the necessary bond, provided the defendants would personally indemnify it against loss of any money belonging to the county which would be deposited in the bank by the county treasurer. The defendants, except Mrs. Campbell, Mrs. Mentzer, and Mrs. Copping, made the indemnifying instrument, and the bank executed the bond, obligating the bank as principal- and the surety company as surety unto Marr, individually and as county treasurer. The rfecitals in the bond refer distinctly to the deposit and custody of funds for which the treasurer would be responsible, and plainly it was executed with reference to moneys to come to the treasurer. The indemnifying agreement also on its face shows that the defendants had asked the surety company to execute a bond in favor of the treasurer of the county to cover the deposits of the treasurer. The indemnitors agreed, by the fifth section of their agreement, that the surety company might extend the bond and renew it, or make new obligation in its. place or in lieu thereof, and withhold notice, and that their obligation would still remain “as fully as if such instrument were described at length herein,” and would remain until the surety company should execute a release. ' . The payment of the first premium carried the bond to June 22, 1912, and the payment of the second premium was to carry out the purpose of the indemnitors to have the bond continue for another year or until June 22, 1913. In the meanwhile it happened that on January 8, 1913, a new treasurer came in. However, the bank remained the depository, and no new indemnity agreement was entered into by the indemnitors, and no new bond was executed by the bank; nor did the surety company execute a release to the indemnitors; nor does it appear that the in [941] clemnitors then made any claim that they had been released from the indemnity agreement. When another annual payment was forthcoming, and just prior to June 22, 1913, the bank again paid the surety company $25 annual premium for the purpose of extending the bond from June 22, 1913, until June 22, 1914. The correspondence between Hays, vice president of the bank, and Britt, the treasurer of the county, is ample evidence that the officers of the bank, who were also indemnitors in the agreement, paid this annual premium in order to continue the bond given by the surety company for the year to end June 22, 1914. All this was done without change in the status of the bank as a depository of public funds, and with the result that the bank and the indemnitors received the same character of benefits. under the bond as continued from June 22, 1913, to June 22, 1914, that they had enjoyed under the previous indemnity agreements and bonds. The bank and the surety company both understood that a new bond, dated June 22, 1914, was made to take the place of the one that had been issued to Mr. Britt’s predecessor as treasurer. Mr. Britt, as treasurer, gave the bank, for the surety company, a release of the original bond, to be effective from and after June 22, 1914; but the indemnity agreement remained without suggestion that it ceased to he of effect. There was ample evidence to say that it was the intent that the bank should remain the depository, and that the indemnity agreement should continue; that the surety company’s liability should continue without interruption, and that the last bond was not to change the several relationships or to interrupt them. This is confirmed lay referring to the express agreement of the indemnitors that the surety company could extend the bond it had executed, or make a renewal thereof, or another or new obligation in its place and without notice, and in such case the indemnitors would still be liable. It is our opinion that under this agreement the indemnitors having received the benefit of the new or substituted bond after June 22, 1914, in the fact that the hank continued to be a depository, the release of the surety company on the original bond as effective of that date, did not terminate the indemnity agreement. .Again, it was immaterial to the indemnitors whether Marr or Britt was treasurer, for they did not undertake that the person who was treasurer would be faithful and honest; their agreement was that the bank (which was controlled, managed, and almost entirely owned by them) would pay the checks which the county treasurer might draw against any deposits which he 'made in the bank. The fact that the indemnitors continued to pay the premiums as they had agreed to do is proof of their desire that the bank should continue as a depository, and the indemnitors having agreed that the bond given by the surety company could be extended or that a new bond could be given in its place, and that the indemnitors would be bound until the surety company should release it, we believe that the several renewals and the bond given in lieu of the one for 1914, should be held as within their covenants. Hart v. Messenger, 46 N. Y. 256. [2] The indemnitors make the point that the clause of their agreement wherein they bind themselves, their heirs and assigns, until the [942] surety company shall have executed a release under seal, is not enforceable, because contrary to public policy. We fail to see the applicability of such a doctrine to this case. [3] The contention .of the surety company that the liability is one of- community, and that therefore the wives of the indemnitors were proper parties, is sustained by the decisions of the Supreme Court of Washington in Horton v. Donohoe Kelly Banking Co., 15 Wash. 399, 46 Pac. 409, 47 Pac. 435, and Way v. Lyric Theatre Co., 79 Wash. 275, 140 Pac. 320. The court having erred in dismissing plaintiffs action, the judgment is reversed, and the cause remanded, with directions to grant a new trial.