Summary
In Thomson v. MacGregor (81 N.Y. 592) the action was on the bond of a receiver which had been given six months after his assumption of the duties of his trusteeship and which contained the condition "if the said Charles B. Riker (the receiver) shall henceforth faithfully discharge the duties of his trust."
Summary of this case from Coe v. PattersonOpinion
Argued June 9, 1880
Decided September 21, 1880
William W. Northrop for appellant. Andrew Gilhooly for respondent.
This case involves but the single question whether the order made December 28, 1877, by the New York Common Pleas, at the close of the accounting of Riker as receiver, requiring him to pay over to his successor, the present plaintiff, the sum of $2,099.27, with interest, as the balance in his hands, was conclusive upon the defendant, who was surety in Riker's bond, but who was not a party to the accounting and had no knowledge that it was pending.
The condition of the bond was, "if the said Charles B. Riker shall henceforth faithfully discharge the duties of his trust," and the instrument was executed and filed January 30, 1875. Riker was appointed receiver on the 9th day of July, 1874, and the complaint alleges that on that day he "entered upon the discharge of said trust," by which the pleader undoubtedly meant that on that day he entered upon the performance of the duties of his trust. Some six months later, and on January 20, 1875, Riker was directed to file a bond, and ten days later the instrument in question was executed by the defendant as surety. As the bond provided on its face that the surety was to be responsible for Riker's faithful discharge of duty only from the date of its execution, there was an antecedent period of six months during which the receiver was acting without any responsibility for his conduct on the part of this defendant, unless, indeed, some rule of law distorts the plain language of his covenant. The rule appears to be well settled that where the engagement of the surety is for the future, he cannot be held liable for the past, as to which he has not covenanted. ( Bissell v. Saxton, 66 N.Y. 60; U.S. v. Giles, 9 Cranch, 212; Farrar v. U.S., 5 Peters, 373.)
In the case at bar, the accounting of Riker must be assumed to have covered the whole period of his official action. When or how the deficiency or misapplication of funds, which occasioned and justified the order of the court charging him with a large balance occurred, we do not know. His entire violation of duty may have ante-dated the bond and preceded the liability of the surety. The evidence against the latter was the order alone, and the failure of Riker to pay in accordance with it. The surety offered to prove the receipts and payments of Riker from and after the date of the bond, and sought to investigate the accounts so as to show that no liability had accrued since such date, but was steadily and systematically prevented by the rulings against him based upon the idea that the order of the court directing Riker to pay was conclusive upon the surety, and barred the defense which he sought to interpose.
Those rulings are now sought to be justified. The general rule that a judgment binds only parties and privies is not disputed, but the case is claimed to come within the class of authorities which hold that one not a party or privy to a judgment may yet be bound by it if he has expressly so covenanted. ( Douglass v. Howland, 24 Wend. 35; Thomas v. Hubbell, 15 N.Y. 407; Thayer v. Clark, 4 Abb. Dec. 391; Rapelye v. Prince, 4 Hill, 119; Baggott v. Boulger, 2 Duer, 160; Westervelt v. Smith, id. 449.) The argument here is, that as the receiver is the officer of the court, its mere agent or instrument to effect its purposes, his plain duty is to obey all its orders, and, therefore, when the surety contracted that the receiver should faithfully perform his duties as such, he in effect contracted to be responsible for any disobedience of his principal, and so was bound by the order disobeyed. We think, however, that a surety is not thus to be brought within the rule by inference or argument, and that, unless the language of his contract expressly and explicitly contemplates a submission to the judgment and shows that the surety must have intended to be bound by it, such rigorous liability is not to be imposed upon him by arguing it from general words having another purpose and a different aim, and so understood by him. The bond is not to be a snare in whose meshes he is caught unwittingly. The liability argued out is under the surface and concealed, and was probably wholly unsuspected by the surety. He might have refused to sign, if a covenant to be bound by a judgment against his principal had been so expressed as to be understood by him. The cases of administration bonds illustrate our idea. ( Scofield v. Churchill, 72 N.Y. 565.) In those cases, besides the general covenant to faithfully execute the trust reposed, there is also the special agreement to obey all orders of the surrogate. That the rule in these cases which makes the adjudication against the principal conclusive on the surety is always based upon the special covenant which in terms submits the latter to the judgment or order of the court, indicates very plainly that the general words were not deemed sufficient, in and of themselves, to effect that result. And yet, since it might very justly be said that an administrator failed to faithfully execute his trust when he disobeyed the orders of the surrogate having jurisdiction, it would be almost as easy, in the absence of the special covenant, to argue out the conclusive liability of the surety, as in the case before us. In every decision which has made the adjudication against the principal conclusive upon the surety, it has been founded on apt words or phrases other than a general promise to perform duty, and which indicated an understood purpose to contract beyond the ordinary liability. Where the condition of the bond is, to obey the orders of the surrogate, to pay any deficiency arising on a foreclosure, to pay all damages and costs that may be recovered, there is apparent on the face of the instrument a purpose to submit to the judgment as conclusive.
The learned judge who wrote the opinion of the General Term seems to have felt the difficulty, for he says "the order and proceedings leading to it do not comprise something that is binding upon the defendant as an adjudication, but are evidence of the facts as to violation of duty in disobeying the order," and the same ground in nearly the same language is taken by the respondent. But if not binding as an adjudication upon the surety it becomes merely evidence, and is not conclusive. It may be rebutted. If the order was wrong, if the receiver owed no balance, if he was required to pay what was not due, then he had faithfully performed his duty as receiver, although not obeying the mandate of the court. It is said "the surety has contracted that the receiver will pay." Undoubtedly, but pay what? Not any sum which the court may order, unless, indeed, the surety has bound himself by that rigorous contract, but such sum as the receiver justly owes, and as an honest and faithful officer ought to pay. And upon that question the surety has a right to be heard. We do not see that it avails any thing to try to distinguish between an order which is binding as an adjudication, and an order which is conclusive evidence as a fact. The substantial thing remains though the phrases are changed. The doctrine pushed to its logical results might easily make every surety for the performance of duty bound by the adjudication against his principal, or so nearly so as practically to abrogate the rule which holds him only when he has explicitly contracted to submit himself to the judgment of the court. We think the vice of the reasoning lies hid in the failure to sufficiently distinguish the relative positions of the principal and surety. As between the principal and the creditors of the fund it is the receiver's duty to pay according to the order for he has been heard and is bound by the adjudication. But as between the surety and such creditors it is not the receiver's duty to pay according to an order made without the surety's knowledge, as to which he has not been heard, and which is not, against him, a binding adjudication.
We cannot, therefore, affirm this judgment without holding that by the terms of his bond the surety contracted to be bound by the adjudication against his principal. The case was tried on that theory. The surety's attempted defense was shut out, and the order treated as conclusive. We can give it such effect only where the surety has so contracted, expressly and explicitly and in terms which show that such result was fairly understood and contemplated.
The judgment should be reversed and a new trial granted, costs to abide the event.
All concur.
Judgment reversed.