McConnell v. Poor

113 Iowa 133 | Iowa | 1901

Ladd, J.

1 How far will a surety on a bond be bound by a judgment against his principal-. alone ? There is no little confusion in the language of the courts on this subject, and entire harmony does not.nrevail in the deeisions. This has resulted sometimes in treating such a • judgment, as res adjudicata in an action ■against the surety, rather than passing on the .character of the contract, and simply holding him to its performance. It is a fundamental principle .in jurisprudence that every man shall .have his day in court, and shall be ■' heard in his own defense, and of this right he may not, under the laws and constitution- of this, state be deprived. '■Por this reason, judgment against the principal mgy never '■■foreclose investigation-of the surety’s liability, unjess,- ;by - virtue of the latter’s undertaking,- he bas obligated himself -directly or by-implication to be. bound .thereby. 1 Where, hs the terms of the bond, the surety is to be bound by the liti- • gation to which he is 'not a party,, the -courts decide, not tjiat the judgment, is an adjudication, because of the connection, but. that he must perform the-.contract as it is, written, Bank v. Read, 86 Iowa, 136. The only ground on which sureties on official bonds generally may -be regarded as boixnd by the judgments against their principals, is that the sureties by the terms of their bond .agree, expressly or impliedly, to abide the result of litigation against their principals. This principle is well stated in Stephens v. Shafer, 48 Wis. 54 (3 N. W. Rep., 835) : “The nature of the contract in official bonds is that, of a bond of indemnity to those who may suffer damages by reason of the neglect, fraud, or misconduct of the officer. The bond is made with full knowledge and understanding that in many cases such damages must be ascertained, and liquidated by an action against tbe officer, for whose acts the sureties make themselves liable, and the fair construction of the contract of the sureties is-that they will pay all damages so ascertained and liquidated in an action against their principal.” See also, Masser v. Strickland, 17 Am. Dec. 668. This court lield in Charles v. Hoskins, 14 Iowa, 471, that judgment against a sheriff might be received in evidence as fixing, prima facia, the liability of the surety. True, other reasons for so holding than here suggested were assigned. But the doctrine of stare decisis has no application to the reasons given for reaching the conclusion; it is limited to the very point decided. The fallacy in the reasoning of that case, as well as City of Lowell v. Parker, 10 Metc. (Mass.) 309 (43 Am. Dec. 436), on which it was based, lies in supposing that, because the surety may claim the benefit of a judgment in favor of his principal, it follows that he is concluded by one against him. But the surety is discharged by a finding for his principal, not owing to the creditor being estoppel, but for that it establishes the absence of liability of the principal; and, -if he is not liable, the surety cannot be, as his obligation is merely incidental to that of the principal. Besides, the discharge of the principal does not always release the surety. If the former be an infant when executing an instrument, and is discharged on that ground, the surety may yet be held. Bank v. Hall, 106 Iowa, 540. To the point is this language, found in Jackson v. Griswold, 4 Hill, 528: “No doubt * * * a decision against the debt would discharge him [the surety]. That view is not on the ground that he is a party, but because the judgment or decree extinguished the debt; and, the principal thing being destroyed, the incident — the obligation of the surety — is destroyed with it. The effect is the same as a release by the creditor or a payment by the debtor.”

It is sometimes urged that, as the surety has become responsible for the debt or good conduct of the principal, judgment establishes the fact on which the surety’s liability rests. A complete answer to this is that the fact has not been established against the surely, because he has been afforded no opportunity to litigate the question. •' Under the civil law, the surety was permitted to defend, and even allowed to prosecute an appeal from the judgment against the principal, though not a party to the judgment. As he was-given his day in court, there appears no serious objection to binding him by the litigation. Much of the confusion in the decisions seems to have resulted from the attempt to apply the rule of the civil law, binding the surety by the-litigation against the principal, without allowing the former-the participation there accorded. We have called attention to the inapplicability of the doctrine of estoppel in such-cases as the appellant, with much propriety, has insisted that, if applicable at all, logically it must extend to bonds in private transactions. The better opinion and the voice of authority is the other way, and a judgment against' the-principal is entitled to no consideration as against the surety, unless by the terms of the contract the surety is to-be bound thereby. Giltinan v. Strong, 64 Pa. St. 244; Fletcher v. Jackson, 23 Vt. 581; Arrington v. Potter, 47 Ala. 714; Douglas v. Rowland, 24 Wend. 34; De Grief v.. Wilson, 30 N. J. Eq. 437; Insurance Co. v. McMillan, 29 Ala. 146; Johnson v. Griswold, 4 Hill, 528; 2 Van Fleet,. Eormer Adjudication, section 567; 2 Black, Judments, section 592. In Fletcher v. Jackson, supra, the court, speaking through Bedfield, J, said: “The general rule undoubtedly is that, in a collateral undertaking by way of guaranty, where a suit is necessary to fix the liability of the-guarantor, the first judgment is prima facie evidence of the-default. But, where the guarantor is liable without suit against the principal, the judgment against him is regarded as strictly inter alios. The jirdgment of eviction, in order-to show a breach of the covenants of warranty, is a case off the first class. The judgment of eviction is a necessary-•step in making ojit, fbe,liability,;of .dbe,.kwayra,ntor.; that is, the casus /oeáe7tis,„jiSo,,top,pgene]fgllyí ,1 apprehended, when •any one ixndertakep, to indemnify qgginst the, ..consequences of a suit, or that,.a suit if,,]p¡o;ught ¡shall be effectual, the .judgment ixx eithers cage,, .being, fhe. casus foederis, i,s prima facie evidence of the, liability.,, j.i^pcl^.on. the .other hand, .where the sxxit ma/^in the first instance,,,be. brought directly ■ against the guarantor,, the judgment against the principal, without notice to the guarantor, is. not evidence; and so, too, if the guarantor liaye notice of suit against .the priiicipal, he is not obliged to.coxicern himself in its defense, bixt ■may await a sxxit against himself, ,axxd then insist xipon the right to contest the whole groiipd.” . .

The defendant in the case at bar was not. a party to the ■contract, nor coxxld he have insisted on being made, a party 'to the actioii between Evans, and IVIcConnell thereon. The latter might have brought suif against, both., principal and ■surety on the bond, bpt jhp chose, as was his right,,,to base his action on the contract-alone., Even .if these might have beeix regarded, for spine...purposes,., as qne instrument, t the appellant elected to treat, them as distinct..,anch separate by basing his suit against Evans solely on. the contract, ■ and that against Poor on.tjie bond. The-surety.may require the ■principal.to defend, for this is his duty; but the surety ow,es mo such dpty to tlie principal, and is under,no obligation to ■defend hini. Poor was not a party to the action on the ■contract,, f,or he could neither appear and control the suit nor appeal from the decree. Nor was he privy to that action. Privity, says Greenleaf, denotes mutual or successive relationship to the same right of property. Privity in law involves the right of representation, and certainly the ■principal, in an action against himself alone, may not represent the surety. As was said in QiUinan v. Strong, supra': '“The privity of the surety with his principal is' in the con'tract alone, and not in the action.” Eor the acts or omis•sions of the principal to which the sxirety pledges himself in liis contract he is bound, and it is only in this respect the principal represents the surety. This is the criterion of the competency .of the principals .declarations and. admissions. Where these form a part of the acts or omissions of the principal for which the surety is bound, they constitute portions of the res gestae, and may be evidence .against the ■surety. But beyond this line clearly the surety cannot be affected by the acts or admissions of his principal, for ho Is not represented by him. True, Poor was the attorney for Pvans in the suit on the contract, contested it with zeal and persistency, and was charged with notice thereof. See Evans v. McConnell, 99 Iowa, 332. But as surety he could make no defense to the action on the contract. His client might have revoked his authority at any moment. He could have gone further, and dismissed the action, or, rather, withdrawn his defense to the cross petition, without consulting the surety. See Jackson v. Griswold, supra. Por the reasons stated, we are of the. opinion-.the district court did not err in holding’ the defendant not bound by the findings against his principal .in- the former action.

2 II. The appellant insists the contract permitted changes, and this is true. But the manner of making them is specifically pointed out- “The value of such changes or alterations, without additions or deductions, will be estimated according to the rate at which the work has been taken, and the amount added to or deducted from the amount hereinafter specified.” This precluded the parties from entering into arrangements for additional ■work, or that of a different character, without compensation corresponding relatively to the contract price. If this were not so, an entirely different building from that stipulated might have been erected at the surety’s cost. Thus.' the alleged change in the broken ashlar work alone occasioned an additional expense of $1,600 or more. — more than the balance - claimed. While tlie plaintiff had the option of making alterations, lie might not do so without paying therefor at the rate fixed by the contract-

3 III. The evidence was in conflict on every issue submitted to the jury, and sufficient to support the-verdict. The instructions in the respects criticised were clear and accurate, and included those requested, in so far as correctly stating the law. — Aeeirmed..