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NATIONAL SURETY COMPANY v. L. R. BECKLUND AND OTHERS

Minnesota Supreme Court1926-11-19No. No. 25,553
169 Minn. 177

Summary

Holding. The court affirmed judgment for National Surety, holding that the defendants are liable as co-sureties for contribution because the bond language unambiguously covered all county deposits, and misrepresentations by the bank's officer cannot excuse liability on a surety bond.

National Surety Company executed a $10,000 surety bond with Farmers State Bank to protect county deposits. In June 1921, the defendants executed a separate $5,000 surety bond for the same bank at the county treasurer's request to permit larger deposits during tax season. Both bonds contained identical language covering all county funds deposited in the bank. When the bank failed in February 1923 with $3,000 in county funds on deposit, National Surety paid the full amount and sought contribution from the defendants as co-sureties for one-third of the loss.

The defendants claimed they believed the second bond covered only deposits exceeding the amount protected by National Surety's bond. However, the bonds' plain language obligated both sets of sureties for all county deposits without limitation. The defendants relied on misrepresentations allegedly made by the bank's cashier, who explained the bond's purpose to them before they signed. Because the cashier's statements cannot bind the county, and the defendants failed to read the bond despite its clear terms, their defense based on fraudulent misrepresentation failed.

Summary generated by law.co from the public-domain opinion. The opinion text itself is public domain.

Key issues

  • Whether co-sureties on overlapping bonds must contribute proportionally to a loss
  • Whether misrepresentations by a principal (the bank) can excuse a surety's obligations
  • Whether the plain language of a surety bond is binding regardless of the parties' subjective understanding

Procedural posture

The trial court entered judgment for plaintiff National Surety, and defendants appealed.

Authorities cited

No cited authorities resolved to law.co cases yet.

Opinion

majority opinion

Taylor, C.

On April 1, 1921, tbe Farmers State Bank of Rock Creek as principal and the plaintiff as surety executed a bond to tbe county of Pine in tbe sum of $10,000 to secure tbe county for county funds theretofore or thereafter deposited in tbe bank. At tbe end of May when taxes on real estate were being paid, tbe county treasurer asked or suggested that tbe bank give an additional bond so that a larger amount could be deposited therein during this period than would be permissible under the existing bond. On June 13, 1921, the bank as principal and the defendants as sureties executed a bond to the county in the sum of $5,000 which contained the same provisions and conditions as the bond executed by plaintiff. On February 7, 1923, the bank was closed by the state banking department and then had on deposit the sum of $3,000 of the county funds. Thereafter the county demanded payment of the deposit from plaintiff in accordance wtih the terms of its bond, and on March 27, 1923, plaintiff paid the full amount thereof. Plaintiff then brought this action to compel the defendants as cosureties to contribute their proportion of the loss, being one-third thereof. The court made full findings and rendered judgment for plaintiff. Defendants appealed.

As there is no controversy concerning the amount for which the defendants are liable, if liable at all, we have no occasion to consider that question. The defendants based their defense upon the claim that they executed the bond on the representation and in the belief that it covered only deposits made in excess of the amount covered by plaintiff’s bond. Both bonds are on.blanks furnished by the county auditor and are identical in form. By their terms they cover all deposits of county funds received by the bank. They bring the sureties thereon within the well established rule which gives a right of contribution from his cosureties to a surety who has paid more than his proportion of the common liability. Young v. Shunk, 30 Minn. 503, 16 N. W. 402; Stone-Ordean-Wells Co. v. Taylor, 139 Minn. 432, 166 N. W. 1069, L. R. A. 1918E, 93; U. S. Fidelity & G. Co. v. Naylor, 151 C. C. A. 20, 237 F. 314; and cases cited in note found in 18 Ann. Gas. 853.

The conversation in reference to giving the additional bond was between the county treasurer and L. R. Becklund, cashier of the bank. Whether it was over the telephone or in the office of the treasurer, they were unable to state. Becklund had the bond for execution. Whether he received it by mail or obtained it from the office of the county treasurer or county auditor, he was unable to state. He testified that after having it at the bank he read it and knew its contents. He executed it as one of the sureties. The testimony shows that the other sureties executed it at Becklund’s request and on his representation that it was to cover , any excess of deposits above the amount of the other bond, and that they signed it without reading it. They had no communication with any of the county officers in respect to the bond, and the only misrepresentations which they claim were those made by Becklund. Becklund was the active officer of the bank and acted for it in procuring the execution of the bond, and any representations he may have made cannot be imputed to the obligee and do not affect the liability on the bond. W. T. Rawleigh Co. v. Hoffman, 162 Minn. 57, 202 N. W. 54. Becklund admittedly knew the contents of the bond and none of the defendants bring themselves within the rule which permits a defense on the ground of fraudulent misrepresentations by the other contracting party. The question whether false representations by county officers is available as a defense against such a bond is not involved nor considered.

Judgment affirmed.