Bassett v. American Surety Co. of New York

Mr. Presiding Justice Carnes delivered the opinion of the court. Nettie Bassett, administratrix, appellee, obtained an order from the Industrial Board of the State of Illinois under the provisions of the Workmen’s Compensation Act of 1913 [Hurd’s St. 1913, p. 1206, Callaghan’s 1916 St. Supp. [[5475(1) et seq.], that the Chicago, Rock Island & Pacific Railway Company should pay her $6.05 per week from April 4, 1914, for a period of 416 weeks as compensation for the death of her intestate, Robert L. Stockton. In January, 1915, the railway company obtained a writ of certiorari from the Circuit Court of Peoria, county to review that action of the Industrial Board and gave a bond in the sum of $3,500, conditioned that it should duly prosecute said writ and pay the amount of any order, judgment, costs and interest rendered and to be rendered against it in case the order and judgment of the Industrial Board should be affirmed in said Circuit Court. Appellant, American Surety Company of New York, was the surety on that bond. The finding of the Industrial Board was affirmed, the Circuit Court ordering that the writ be quashed February 5, 1916. The railway company took the case to the Supreme Court on writ of error and that court on June 22, 1916, affirmed the judgment of the Circuit Court and rendered judgment against the railway company for appellee’s costs taxed at $5 (Chicago, R. I. & P. Ry. Co. v. Industrial Board of Illinois, 273 Ill. 528). Thereafter, November 3, 1916, appellee filed her petition with the Industrial Board for a lump-sum settlement, and on January 12, 1917, the board entered an order fixing $1,608.19 as the amount found on computation under the provisions of the statute of the present worth of the deferred instalment payments. Appellee was paid by the railway company, or appellant, the full amount due her for weekly instalments preceding and not included in the computation fixing the lump sum. She refused to accept payment of instalments that had been included in that computation. She brought this action of debt on the bond against the surety company alone in February, 1917, in her declaration setting out the bond and stating the facts as above noted, excepting the fact that she had refused payments of weekly sums that were included in the lump-sum computation. She alleged as breaches: (1) nonpayment of the lump sum, $1,608.19; (2) nonpayment of $5 costs in the Supreme Court; (3) that the railway company did not prosecute its writ with effect; (4) nonpayment of the weekly instalments included in the lump-sum computation; and added the common counts, but filed an affidavit of claim under section 55 of the Practice Act (J. & A. 8592), stating, in substance, that her demand was for payment of money due under the lump-sum settlement, and that the amount due her was $1,613.19. (The amount of said lump sum and the $5 costs in the Supreme Court.) The defendant demurred generally and specially to the declaration. The court overruled the demurrer as to the first, second and third assignments of breach, and the common counts, and sustained it as to the fourth assignment. (Failure to make weekly payments.) It is said by appellee, perhaps correctly, that this action of the court amounted to a holding that the obligation of the bond covered the default of the railway company in payment of said lump sum. The court may have sustained the demurrer to the fourth assignment of breach charging failure to make weekly payments of amounts that had been included in the lump-sum computation on the ground that plaintiff could not at the same time demand payment of a lump sum and also of the weekly sums that had been merged in the larger amount; but appellant, instead of abiding by its demurrer, pleaded over to the whole declaration repeating the facts there alleged touching the liability to pay the lump sum, and averred as new matter that it was ready and willing to pay the weekly payments and had offered to do so, but the plaintiff had refused and still refuses to accept them; and answered the charge of nonpayment of costs in the Supreme Court by pleading a tender and payment into court of that amount and of the costs of this case up to the time of the tender. Because an affidavit of claim was filed by the plaintiff, an affidavit of meritorious defense was re-j quired by said section 55 of the Practice Act, and one was filed, stating that the railway company and the defendant had complied with the terms of the bond sued on in making weekly payments up to September 25,. 1916, and since that time the plaintiff had refused and still refuses to receive them; that it had tendered in court the amount of the unpaid Supreme Court costs, together with all accrued costs, and that as to the nonpayment of the $1,608.19, the amount of the award of lump-sum settlement, that sum was granted and allowed to the plaintiff after the bond was given and in a distinct and separate proceeding from the one in review upon which the bond sued on was made and executed, and was not an order or judgment rendered against the railway company in the said proceeding pending before the Circuit Court in which the bond was given. Appellee moved to strike the pleas and affidavit of merits from the files for insufficiency of the affidavit in not setting forth any legal defense to the cause of action declared on. The court sustained the motion, and the defendant, electing to stand by its pleading, judgment was entered as by default for $3,500 debt and $1,613.19 damages. Under section 9 of the Workmen’s Compensation Act (J. & A. 5454), in force when the bond was given and until July 1, 1915, appellee could on petition to the Industrial Board have a lump settlement named, subject to the right of the railway company to reject payment in that manner. But by an amendment in force July 1, 1915, such option was denied in this class of injuries (Hurd’s St. 1915, 1916, “Employment,” p. 1278, Callaghan’s 1916 St. Supp. | 5475 [1]). In other words, her right to compel the railway company to pay in a lump sum the present value of the instalments rested entirely on a statute enacted after the bond was given. The substantial question in the case is whether the undertaking in the bond to pay the amount of any order, judgment, costs and interest rendered and to be rendered against the railway company in case the order and judgment of the Industrial Board should be affirmed in said Circuit Court raised an obligation to pay some other and different amount for which the company might become liable by reason of subsequent legislation. That question was before the court on the motion to strike the pleas from the files. Perhaps it was necessarily involved in the demurrer to the declaration. Appellee says it was" and argues on the authority of Home Mut. Fire Ins. Co. v. Garfield, 60 Ill. 124, and other early cases, that appellant by pleading over admitted the construction of law and is estopped from raising the question here. Appellant answers that it was necessary to plead to the common counts and to the breach of nonpayment of Supreme Court costs, and necessary to plead- the refusal of appellee to receive weekly payments, and therefore says that appellee’s authorities do not apply. It is unnecessary to discuss the decisions on that question prior to Chicago & E. I. R. Co. v. Hines, 132 Ill. 161. It is there said that the rule is more of form than of substance, and that the question of the sufficiency of the declaration to support the judgment may be brought before the Appellate Court for review notwithstanding the defendant had estopped itself from moving the trial court to arrest the judgment for the same reasons that it might have urged on its demurrer to the. declaration. To the same effect is Chicago, R. I. & P. Ry. Co. v. People, 217 Ill. 164, 172. See also, Gillman v. Chicago Rys. Co., 268 Ill. 305, 310. We conclude the record presents for our determination the question whether the undertaking in the bond was broad enough to create an obligation of the surety to answer for the default of the principal maker in payment of this lump-sum settlement. It is said in Chicago & A. R. Co. v. Higgins, 58 Ill. 128, 133: ‘£ The undertaking of a surety is to receive a strict interpretation. His liability is not to be extended by implication beyond the terms of his contract. To the extent, and in the manner, and under the circumstances pointed out in his obligation, he is bound, and no further.” And in Shreffler v. Nadelhoffer, 133 Ill. 536, 551, quoting from Mr. Justice Story: “Noth- « ing can be clearer, both upon principle and authority, than the doctrine that the liability of a surety is not to be extended by implication beyond the terms of the contract. To the extent, and in the manner, and under the circumstances pointed out in his obligation, he is bound, and no further. It is not sufficient that he may sustain no injury by a change of the contract, or that it may even be for his benefit. He has a right to stand upon the very terms of his contract; and if he does not assent to any variation of it, and a variation is made, it is fatal.” Illinois cases in support of the above rule are there collected. The authorities are again collected in McCartney v. Ridgway, 160 Ill. 129, 159. Among other illustrative holdings, we there find that as a general rule any agreement between the principal and the party secured, essentially varying the terms of the contract by which the surety is bound without the consent of the surety, will release him from responsibility. Any dealings between the principal and obligee amounting to a departure from the contract by which the surety is bound by materially varying ' or enlarging his liability without his consent will generally operate to discharge him. It is said: “The same result will follow, as a general thing, where the principal acts in another office or capacity from that designated in the contract of suretyship, or where his responsibilities in the same office are increased.” Applying these principles of law to the facts in this case, we see no ground for holding appellant liable for the payment of the amount named in the lump-sum settlement. If appellee had procured a voluntary change of the obligation of the railway company she could not have asked the surety to respond to the terms of the new agreement. We do not see how she can be held in a better position because she was able to and did coerce the change. We have found few cases where the question of discharge of sureties by change of the obligation of the principal effected by an after-enacted statute has been considered. It is said in 32 Cyc. 226: “If the contract of the principal is changed or enlarged by legislative enactment, or by order of court, the surety is nevertheless discharged.” Schuster v. Weiss, 114 Mo. 158 (21 S. W. 438, 19 L. R. A. 182) is cited among other authorities. It is an interesting case supporting that text. The rule governing liability of sureties on official bonds may be pertinent to the inquiry whether a change effected by law releases the surety. It is said in 29 Cyc. 1460, that sureties on official bonds are discharged by change in the office which are so great as to make the office quite a different one from what it was when the bond was executed, such as an extension of the term of the office, an enlargement of the territorial jurisdiction. The court in People v. Tompkins, 74 Ill. 482, had such a question under consideration where the principal on the bond came in possession of moneys under the rules and regulations of the commissioners of railroads adopted after the bond was executed, and it was held that the sureties were not liable because they were not chargeable with knowledge that he would be. required to collect and have the custody of the funds in controversy. In Davis v. People, 6 Ill. 409; Governor for use of Thomas v. Lagow, 43 Ill. 134; and Governor for use of Thomas v. Bowman, 44 Ill. 499, are found discussions of the effect of change of the principal’s obligation by operation of law, and reference to other Illinois cases where it was held that the surety when entering into his contract should have contemplated the right and power of the legislature to change the obligation of the principal. We conclude that the present case falls within that class where the surety cannot be said to have undertaken to answer for the default of its principal in performance of duties and obligations raised by after-enacted laws differing substantially from the obligation of the principal when the bond was executed, and not the result of any judgment entered in the suit in which the bond was filed. It is not suggested in briefs of counsel that there is any question of the power of the legislature to change the liability of the railway company, or any question whether the Act of 1915 applies to liabilities fixed under the former statute. If there is such a question we have not considered it. We have assumed from the pleadings and briefs of counsel that there is no deferred unpaid weekly payment not included in the computation of the lump-sum settlement, though the record is not entirely clear on that question. If there is in fact such an unpaid sum it could be recovered under the fourth assignment of breach. If that assignment refers, as we have assumed, to weekly instalments that are included in the lump-sum settlement, appellee could not recover those sums without entirely repudiating the lump-sum settlement, and whether she might in this case put herself in position to do that is a question not here presented. We conclude that appellee under her declaration was not entitled to judgment for the amount of the lump-sum settlement, therefore the judgment must be reversed and the cause remanded. Either party should be permitted to amend its pleadings, if desired, and questions arising on the pleadings may be again presented and passed on in future proceedings not inconsistent with the views here expressed. Reversed and remanded.