1122 _ GEORGIA CASUALTY CO. V.._BOARD OF DIRECTORS [188 OF ST. FRANCIS LEVEE DISTRICT. GEORGIA CASUALTY COMPANY V. BOARD OF DIRECTORS OF ST. FRANCIS LEVEE DISTRICT. -4-3341 Opinion delivered March 26, 1934. EsToFTEL—AeTs MAKING INJURY POSSIBLE.—Where one of two innocent parties must suffer because of a third party's wrongful act, one who placed it in the latter's power to perpetrate • such act must suffer. .2. NSURA NCE—INDEM NIFYING • BO ND—AGENT'S . FRAUD.—A surety on a bank's bond to indemnify a levee district against loss • of deposits -1/.0d liable for loss resulting irom fraud of the sureties agent, in whom the surety placed the power to perpetrate the fraud. 3. I N SU RA NCE—I N DEM N IFY I NG BO ND—POWER OF SURETY'S .AGENT.—A surety's agent authorized to execute a bank rg depository bond, without restriction as to amount or time or, submission thereof to the surety for approval, held authorized to extend the bond for a reasonable time. 4. PRINCIPAL AND AGENT—POWERS OF AGENT.-: -Power of S surety's agent to make or extend a bond binding the surety doeS not con-. fer authority to release a bond given, to indemnify such surety against loss by reason of having signed such bond. Appeal from MISSis . sipPi. Chancery Court, Ogceola District ; J. F. Gautney, Chancellor ; affirmed: • • Sam Costen and House, Moses ce Holmes, for appellant. S. W. Ogan, J. L. Shaver and G. B. Segraves, for appellee. James G Coston and J. T. Costbn, for indemnitors— cross-appellants. HUMPHREYS, J. This is an appeal by Georgia . Casualty Company from a decree for $38,366 rendered.against it in favor of appellee on an indemnity bond exeCuted by it to -appellee on Match 18, 1930, agreeing to pay not to exceed $40,000 to appellee any loss it might sustain on account of deposits made in the Bank of Osceola, said bank being the principal in the bond and appellant the surety therein. Also an appeal by J. L. Williams,• H. V. Cart-wright, Ike Miller, and 0. W. Knight from a decree in like amount rendered against them in favor of .appellant on an indemnifying agreement to reimburse appellant
ARR.] GEDRGIA CASUATY CO. V. BOARD OF DIRECTORS 1123 OF . S.T. FRANCIS LEVEE DISTRICT. herein for all loss it might sustain on account of the bond executed by.it . The . issues joined by the pleadings were whether the bond sued upon by appellee had expired 'at the time said bank failed 'on December 17, 1931, and, if not, whether the bond was obtained through the fraud of dppellant's own agent, in which • fraud appellee participated ; and whether J. L. Williams, H. V. Cartwright, Ike Miller, and W. 0. Knight were released from ;their agreement or undertaking when the bond sued upon was extended. The' bond sued upon by appellee was executed on. March 18, 1930, to expire March 18, 1931, in .consideration of $5 a thousand or $200, which was paid to B. Frank Williams, , the general State agent of appellant. Prior to the execution . of Ibis bond, the deposits of appellee were protected by indemnity _bonds executed , by the Southern Surety Company. J. L. Williams was president of the board of directors of St. Francis Levee District, appellee herein, and President of the Bank of Osceola. B. Frank Williams , was his son, who was located in Little Rock in the bonding business, and represented appellant . as its general agent in the State for the purpose of transacting all its business. , He had a power of attorney from it which read, in part, as follows : To make, execute, seal, and deliver for and on its behalf as .surety, any and all bonds and undertakings, recogniiances, contracts of indemnity and other writings obligatory in the nature thereof, which are or may be allowed, requiredor permitted by law, statute, rule, regulation, contract, or otherwise, and . the execution of all such instrnMents pursuance of these presents shall be as binding npon said Georgia Casualty ComPany, as fully and amply, to all' intents and purposes, .as if the same had been duly executed and acknowledged by its regnlarly elected officers at its principal office.!' An application .was made to appellant for a bond in the sum of $15,000 by ' appellee and said bank, but a bond was written for $40,090 to c ' over the deposits .bY the agent in tbe name'of appellant, for which the agent was paid $200. He accounted to 'aPpel . la . nt for $75..premium only. At the time he' wrote and delivered the bond to
1124 GEORGIA CASUALTY CO. V. BOARD OF DIRECTORS [188 - - OF ST.- FRANCIS LEVEE_DISTRICT., appellee, he alsO delivered his power of attorney to .its secretary. On the sathe date the bond and power of attorney were delivered to appellee J. L: Williams, and the other directors of the said bank executed and mailed an indemnity agreement to appellant, referred to abeve. No amount was fixed in said agreement. In October, 1930, appellant wrote a letter to appellee stating it was surety on a $15,000 bond for it, and asking for a copy of the bond. Appellee sent the letter to B. Frank WTh liams at Little Rock, but made no answer to the letter itself. In November appellant wrote asking B. Frank. Williams for a copy of the bond, but failed to get it. In February, 1931, before the expiration of the bond, appellee notified B. Frank Williams that appellant must furnish another bond in like amount or it would get a bend froin the Southern Surety Company. On the 26th of February, 1931, he furnished another bond in which the said bank joined as principal and appellant as surety' to expire February 26, 1933, and later extended the original bond to March 18, 1932, and afterwards changed the expiration of 'the new bond to February 26, 1932, and charged and collected a premium of $800 from appellee, which it seems was never sent to appellant. There is testimony in the -record tending to show that B. Frank Williams violated the confidence placed in him by his company, and some tending to show that the officials of appellee participated in the fraud or had knowledge thereof, but there is other testimony tend h i g to show that appellee had no such 'knowledge, and did not participate therein. The chancellor found that both of the bonds sued upon were executed by B. Frank Williams, that the Levee District paid tbe premiums on both bonds, and that it bad. no knowledge or notice of tbe fraud practiced upon appellant by its own agent. After a very careful reading of the testimony, we are unable to say that this finding is contrary to the weight of the evidence. The law is plain that, where one of two innocent parties must suffer on account of the wrongful act of a. third party, the one must suffer who placed it in the power of the third party _to perpetrate
ARK.] GEORGIA CASUALTY'CO. V. BOARD OF DIRECTORS 1125 OF ST. FRANCIS LEVEE DISTRICT. the wrongful act. Maccabees, incorporated, v. Pierson, 177 Ark. 243, 6 S. W. (2d) 305. In the instant case, appellant placed it in the power of B.. Frank Williams to perpetrate the fraud complained of, and must bear tbe loss resulting- therefrom. The only question .now left for determination is. whether, under the power of attorney, B. Frank Wil-liams had authority- to extend the indemnity bond by changing the date of expiration. Having power to execute the bond in the first instance withOut restriction as to, amount or time and without submitting it to appellant for approval or confirmation,. it follows that he might extend the time for any reasonable period. There is no restriction whatever in the power of attorney as to the amount or time for, which. it might•be extended. He could ha-ye exeeuted a iiew bond, and he actually did s9; but later chose to extend the original bond. The power to extend a bond is necessarily couditioned upon power to make one for an unliMited time. A majority, however, are of the opinion that the power or authority to make or extend a bond does not cinifer 'authority to release a bond given to indemnify the surety against loss. In. this latter view, the writer does not concur, being of the opinion that the power of attorney was broad enough to authorize the agent to . do anything the officers of appellant might do. . The decree is therefore affirmed on both direct and cross-appeals. . .BITTLER, J., (dissenting). I cannot agree to the conclusion reached by the majority of the court. In the discussion of . this case it was conceded that the effective bond was . that of -date, March 18, 1930, and that the bond of February 26, 1931, sometime-s called the "second bond," was never. in fact accepted by the-Levee -Board. In fact, when the Bank of Osceola became insolvent, and the Casualty Company was .advised of this, the Levee Board based its right :to recover, of the CaSualty Company the -amount..of its deposit in the Bank of Osceola on the first-mentioned -bond, and when the representative. of the Casualty Company was making an investigation no information wa8 conveyed to him of . the existence of
1126 GEORGIA CASUALTY CO. IL BOARD OF DIRECTORS [188 OF ST. FRANCIS LEVEE DISTRICT. the last-mentioned bond or of any claim, made there-under ; also, when this suit was filed, the right to recover was predicated on the bond of March 18, 1930, and while, by an amendment to the complaint, the bond of February 26, 1931, was pleaded, this was clearly an afterthought. -The power of attorney given by the Casualty Company to its. agent, Frank Williams, is set out in the majority opinion, which holds that its terms were sufficiently broad to give authority to alter bonds which had been formerly executed by the agent, and that when he, in February, 1931, altered the bond by changing the date of its expiration, making it tO run for a year longer than as originally executed, he was acting within the authority conferred upon him by the power of attorney. It will be observed that the power given to Frank Williams by the Casualty Company was to "make, execute, sell and-deliver for and on its behalf as surety any and all bonds and undertakings, recognizances, contracts of indemnity and other writings obligatory in the nature thereof." The general principles governing the power of an agent acting under authority as was Frank Williams, the agent of the Casualty Company, is stated in 2 C. J. 645, as follows : "Presumptively an agent is employed to make contracts, not to rescind or modify them, to acquire interests, not to give them up, and no power to cancel or vary an agreement is to be inferred from a general power to make it, nor has tiny agent any implied power to waive or give up rights or interests for his principal, or to increase his obligations and liabilities for the mere benefit of third persons, unless the principal knows or approves of such modifications by the agent. Thus an agent has no implied authority to extend the time for the performance of a contract, except where it is' clearly within the scope of his agency. However, a general agent may act under such broad power to contract in his own name, or to make terms or to settle within his own discretion, as to overcome this presumption and bind the principal by a modification, rescission, or release." In other words, as stated in the case of U. S. Bedding Co. v. Andre, 105 Ark. 1.11, 150 S. W. 413, 41 L. R. A.
ARK.] GEORGIA CASUALTY CO. v. BOARD OF DIRECTORS 1127
OF ST. FRANCIS LEVEE DISTRICT. • (N. S.) 413, where the authority must be found from plicatibn, "the aet of the" agent must be practically indispensable and essential in order to execute the duty actually delegated to him. ' His implied authority is limited to those acts of ake kind with the very act he is expressly impowered to do and from which the authority is implied, but his authority can never . be extended •y implication to do an act or make an agreement which is beyond the obvious purpose of his employment. * Being employed for one purpose, he has no authority to do:another, .either actual or implied." An examination of the power will disclose that it did not authorize the agent to alter the bond which he was authorized to write after it was executed and delivered. Under the rules of law, supra, an attorney in fact under a power of attorney must conform strictly to the authority expressly given, and his acts are necessarily confined within the expres§ powers granted. The _agent, therefore, had no authority to make the alteration by which the obligation of the bond was extended for the period of another year. It is quite evident, from the testimony of the secretary of the Levee Board, that he knew that this was an unusual act, and he must have known from the- provisions of the bond itself thal no extension of its terms could •e made in this manner by the agent. This is' clear from a consideration of the .following paragraphs of the bond : "Provided that no erasure. or change and no change or waiver of any of the terms or conditions of state-k ments shall be valid unless indorsed on tbe bond and signed by the president or vice president and attested.by one of the secretaries or assistant secretaries of the company." " This obligation may be continued for any subse7 quent period by continuation certificates signed by the surety -by its president or one of its vice presidents under seal, and attested by its secretary or one of its secretaries." The provision is clearly Made that no erasure- or change shall be valid unless made in a specified way,
1128 'GEORGIA-CASUALTY- CO. V. BOARD -0E-DIREGTORS . - [188-
OF ST. FRANCIS LEVEE DISTRICT% and it is also clearly directed how the obligation of a bond may be continued; so these provisions apprised the Levee Board of the limitation of the agent's authority, and it knew when the alteration was made that this was beyond the. scope of the agent's power. There is another reason why the Levee District ought not to be allowed to pr6vitil in this action. It is undisputed that the agent of the Casualty' Company violated his trust in the execution of the bond of Mara 18th. The Bank of Osceola made application for a $15,- 000 bond. It was in this amount that tbe agent reported to the company that he had written it, and for a bond of this size a premium of $75 was' charged, the agent's commission being $22.50, and the. balance to be remitted 1;o-the company. The agent remitted $52.50, but he collected $200 froth 'the Levee Board. On February 17, 1931, the company notified its agent that on the 1st of March, 1931, it would-cease to do business in Arkansas. - Two days before the company was' to withdraw from the State, without notice to it and without application having been made by the Bank of Osceola, the agent went to-the office of the Levee-Board, secured the bond of March 18, 1930, which by its terms expired March 1.8, 1931., and altered the same by making the expiration date March -18, 1932, charging and. collecting $200, of which he failed to advise his principal. After the company withdrew from the State, from time to time it wrdte its agent to secure and return to it the original bond of March 18, 1930. The agent ignored all of these letters, and finally the company wrote the Levee Board, in Sep-tember, 1931, that' it had written a depository bond to the Levee. District on the Bank of Osceola for $15,000 which had expired March 18, 1931, and that it- desired to have the canceled bond, or a statement from the Levee Board that it claimed no liability thereunder. Instead of replying to the Surety . Company, the Levee Board turned the letter over to the agent, and the first communication the surety company received from the Levee Board was a letter in December giving notice that the Bank of Osceola had closed its doors on..the 1.7th of that
ARK:.] GEORGIA CASUALTY . CO. V. BOARD OF.DIRECTORS 1129 OF ST. FRANCIS LEVEE DISTRICT. month ; that; it had a. deposit of $38,366.05 in said bank, and -that it claithed and demanded the 'payment of the same. by the Casualty Company by reason of. a bond executed March 18, 1930; expiring on the same date in 1932. This was the first •knowledge the Casualty Company had tha.t any such bond was in existence. Prom the testimony of the- secretary of the Levee Hoard, it Is clear that he knew that the action of the agent. in'writhig a 'bond on February 26, 1931, for $40,000, .and a day 'or two later coining in and changing the expiration date oii the bOnd of March 18, 1930, and his - request for the return of the bond . written February 26, 1931, and later 'On hiS change 'of Ihe bond written February 26, 1931, So as tO Make it appear that it was written preceding that date; was irregular and so suspicious that he (the secretary) refused to surrender either one of the bonds. With these facts witliin the knowledge of the Levee Board, wheir it received the letter from the Casualty Company in September, 1931, asking for , a. return of the canceled bond, the amount of which was stated, it then knew, or ought• to have known, that the agent had practiced a fraud upon the Casualty Company, and good faith demanded that it should have answered the letter of • the company disclosing all the facts within its knowledge. Had it done so, the . Casualty Company would haVe had the opportunity to protect itself by cancelling the bond, and the Levee Board could have protected -itself by a withdrawal of its deposit -from tbe Bank of •Osceola... . . It is . elementary that one may estop himself, either by his positive acts or bV omission, from' asSerting right against a party 'Who- has been injured. It is difficult to lay down any . accurate -rule by •which e.stoppels in pais may be measured, fOr eacb case must depend upon its own facts, and in no two cases Are the facts precisely the same-.. But this is' a case Which calls -for application Of the doctrine, for clearly good law and good morals . required the Levee Board to disclose to the Casualty Company the fact that its agent had written a bond in a greater, amount than it had supposed-and then, by altera-
tion, had extended its obligation for a year longer than when the bond was written, and to disclose to the Casualty Company that it then claimed that a yalid and sub;• sisting bond for $40,000 existed for which the Casualty Company was liable. As already said, had the Levee. Board done this, both it and the. Casualty Company had ample means of protection, and by its silence it acquiesced in the fraud of, the agent, and should not be allowed to recover in this case. It follows that there was no liability on the part of the. indemnitors. think, therefore, that the judgment of the trial courl should be reversed, both on direct and cross-appeal,. and that the case should be dismissed. I am authorized to say that Mr.. Justice MCHANEY concurs in the. views I. have expressed.
You are being directed to the most recent version of the statute which may not be the version considered at the time of the judgment.