128 Iowa 54 | Iowa | 1905
In the year 1893 the First National Bank of Ida Grove, 'Iowa, ceased to do business, and transferred its assets to one J. Tl Hallam. Soon thereafter Hal-lam, who had been conducting a private bank, united with others to organize the plaintiff bank, himself becoming the owner of something more than two-thirds of the capital stock. The defendant C. J. Seidensticker, who had been employed in the national bank, and subsequently by Hal-lam in his private bank, became the plaintiff’s first cashier, and as such gave the bond now in suit, with the defendant F. C. Knepper as his surety. The condition of the bond is in the' following words: “ The condition of this bond, is such that, Whereas, the said Chas. J. Seidensticker has
The statute invests savings banks with the power to appoint such officers, agents, and employes as the business transacted by them may require. Code, section 1844. It
It is elementary that a surety, especially one who assumes that relation as a mere matter of accommodation to one or both of the principal parties, is entitled to rely upon the strict terms .of his contract, and his liability will not be extended or enlarged by implication. Miller v. Stewart, 9 Wheat. 680, 6 L. Ed. 189. It is equally well settled that, in the absence of stipulations making the contrary intention clearly and unequivocally apparent, the obligation of. a surety upon an official bond does1 not extend beyond the term or period of service to which such officer had been appointed or elected when the bond was givetí. Wapello Co. v. Bigham, 10 Iowa, 40; Fresno Co. v. Allen, 67 Cal. 505 (8 Pac. Rep. 59); South Carolina Society v.
Even if we accept this construction as correct, we -think our statute, which provides that the cashier shall hold his office “ at the pleasure of the board,” is not the equivalent of the Massachusetts act. A statute which unequivocally gives the cashier the right to ‘ retain his office until removed may, without violence to the meaning of these words, be held to imply an absence of authority in the board of directors to require an annual appointment or reappointment of a cashier whose services are found to be satisfactory, while a provision that he shall hold his office at “ the pleasure of the board ” does not have that obvious effect. It is a fair construction of' this provision to say that, while retaining the right to remove him at any time, the board may properly pursue the plan of appointing or employing a cashier for a year at a time, and make the annual -reappointment a condition precedent to his right to continue in such position.
That the majority opinion in Amherst Bank v. Root is made to turn upon the construction of the local statute has been distinctly held by the Massachusetts court in Richardson, School Fund v. Dean, 130 Mass. 242. In that case the charter of 'a corporation provided that its trustees should be chosen for a period of three years, and that other officers should be appointed as the by-laws might provide. No by-laws were adopted, or, at least, none appear in the record; but it was shown that “ by the uniform practice ” of the • corporation its( treasurer had been, chosen at regular triennial elections “ for the ensuing term of three years.” Under these circumstances it was held that the bond given
Of the other cases cited by the appellee in this connection, we will speak only of Westervelt v. Mohrenstecher, 76 Fed. 118, 22 C. C. A. 93, 34 L. R. A. 477, which was an action upon the bond of the cashier of a national bank. It was there decided that the annual re-election of the cashier did not operate to terminate the obligation of his bond given at the time of his first appointment. This holding was based in part upon the' Act of Congress which makes the duration of service of bank officers indefinite and subject to be terminated at the will -of the directors, and in part upon the peculiar language of the bond, which was expressly conditioned for the faithful performance of
The provision that an officer may be dismissed at pleasure can apply as well tq an appointment limited to a given time as -to an appointment to an indefinite period. It does not impliedly prohibit the fixing of a time beyond which the appointment shall not extend. Its effect is simply that the appointment, however made, shall be terminated at the' pleasure of the appointing power. An appointment may be made which, if not previously terminated by the action of the board of directors, will continue for the period designated and expire by its own limitation. There is nothing in the statute which requires-us to hold that this surety contracted with reference to an unlimited period when the appointment was in terms for a specified time. The cashier’s re-election was something more than a meaningless expression of the pleasure of the directors; it was the filling of a vacancy occasioned by the limitation of their previous appointment.
It is difficult to avoid the force and justice of this reasoning. It finds support also in the following cases: O’Brien v. Murphy, 175 Mass. 255 (56 N. E. 283, 78 Am. St. Rep. 487); Bigelow v. Bridge, 8 Mass. 275; Union Co. Sav. Inst. v. Ostrander, 163 N. Y. 430 (57 N. E. 627); Moss v. State, 47 Am. Dec. 116; Bank v. Hunt, 72
Few, if any, of these cases are quite parallel in their facts with the one we are considering, but they amply sustain the rule, to which we adhere, that a cashier’s bond which does not expressly limit the period of it's operation must be read in connection with the terms of the appointment under which such cashier holds his office, and, if such appointment be for a definite period, the bond ceases to be effective upon the expiration of the term so designated. The reasoning upon which this rule*is based seems to be sound, and the rule itself places an undue burden upon no one. He who is requested to become surety upon the bond of a neighbor or friend who has been made cashier of a bank under an appointment expiring in one year or other short period may willingly do so where he would very reasonably refuse to assume an obligation which-might continue for a lifetime. Before assuming the obligation, the surety may reasonably inquire as to the time and terms of his principal’s appointment, and rely upon the actions of the corporation in that respect. To hold otherwise is to set a trap for the unwary. Says Chancellor Bent-:
It is a well-settled rule, both at law and in equity, that a surety is not bound beyond the present terms of his contract. This rule is founded upon the most cogent and salu
Believing, as we do, that the engagement of the surety in this case must be measured by the terms of the appointment under which the cashier was serving at the date of the bond, we are constrained to hold that the appellants cannot be made liable for defalcations of Seidenstieker occurring after his first re-election.
This conclusion renders it unnecessary for us to enter upon a consideration of the m¿ny other interesting questions which have been argued by counsel.
For the reasons stated, the judgment of the district court is •reversed.