224 JONES V. HADFIELD. [192 JONES V. HADFIELD. 4-4175 Opinion delivered February 17, 1936. 1. APPEAL AND ERROR — PA RTIE S TO ACTION. —In an action against a former city treasurer and the surety on his bond to recover money belonging to the firemen's pension fund lost in bank failure, it could avail nothing to decide the mooted question of the propriety of permitting the minor children of a fireman who lost his life in the discharge of duty to maintain the action, since the city and the trustees of the fund were parties, and any judgment must be against defendants to require restoration
ARK.] JONES V. HADFIELD.. 225 of funds ; and whether 'they have any interest in the fund may be tested when they make claim against it, after it is returned to city treasurer. 2. OFFICERS.—Bonds made by officials to the State or city rnay be sued , upon by any. one interested. , ,, • - 3. MUNICIPAL CORPORATIONS.—Under ACts 1921, p. 454, the , city hay-. ing the legal title, ' and 'tlie trustees having , control of the, disbursement , of the firenien's Pension fund are pioPer partieS plaintiff, in ' an action . against . a former. . city treasurer and the surety on -his bond for, ,nioney belonging to ;that, fund and lost -in bank failure; and . ,the incumbent , city treasurer: who refuses to become party plaintiff may, under §. 1097, C. iz M. Dig.,, be made a defendant. 4. OFFICERS.—Security must be given as a condition precedent to a proper qualification for ,• office and for the assumption of the responsibility thereof. If an officer be unWilling . or unable to giye this SeCurity, he cannot properly enter • Upon the duties of the office. Bonds , made by public- bfficers are statutory; all conditions and stipulations .are statutory ; and whatever •else may be added, by way of limitation or , impairment, must be deemed surplusage. 5. MUNICIPAL CORPORATIONS.—Surety On bond of city treasurer is liable for money belonging to firemen's pensiOn fund and lost in bank failure, and a provision , in the bond against such loss, "any law, decision or statute of the State or ordinance of the city. to the contrary notwithstanding," held ° unauthorized a g inconsistent with the kind of bond Contemplated by laW. Appeal from Pulaski Circuit Court, Second•DiviSion ; Richard M. Mann, Judge ; reversed.. Ed I. McKinley, Jr., T. H..,Humphreys, Jr., and Sam . T. cf . Tom Poe, for appellants.' • • Horace Chamberlin, Donham . (6 Fnik and Fred A. Donliam, for appellees. • : BAKER, J. 0. D. Hadfield was elected and served' two terms as. the city treasurer of the city of Little Rock. His second term expired April 10, 1933. U. L. Alexan: der was elected as his, successor.. • On the expiration of Hadfield's .second term he failed to paY over to Alexander, his successor in office, $63,280.07, which belonged to the Firemen's Relief & Pension Fund, of Little Rock.... This . money had' : been deposited by Hadfield in the . Peoples Trust .Company and• said company was upon a restricted basis •frorn• a time not made certain, but, at least, from: March, 1933,
226 JONES V. HADFIELD. [192 and upon that account was not able to pay all deposits in full. Alexander, the newly-elected treasir, made demand for this money, but took no step to mak- the collection Or have it paid over to him as the successf \ Had-field. Peoples Trust Company was taken in chaly the banking department, and there was paid on Ma)22, 1933, $31;640.03, and later on June 22, 1934, $9,492.01 leaving a balance of $22,148.03 still owing by Hadfield to his successor in office. • To recover this last-mentioned sum or balance, a suit was . filed against Hadfield, and against Fidelity & Deposit Company of MarYland, surety upon his bond, to require the payment of this sum of money, and, on account of the fact that the newly-elected treasurer would not join in this . suit, the complaint showed that fact and named him as a defendant under the provisions of § 1097, C. & M. Digest. • In the circuit court there was a recovery against Hadfield for the balance due, with interest at. 6 per cent. from the date of the judgment. The court found in favor of the Fidelity & Deposit Company of Maryland, and discharged it: The appeal challenges the correctness of that judgment . in that -the appellants claim that judgment should haVe been rendered for interest at 6 per cent. from the date Hadfield retired from office, and that judgment should have been rendered against the surety upon his bond for the same amount. The appellees tendered . several defenses. One is that the two minor appellants showed no interest; such as would permit them to sue. It was contended also that the bond executed by Hadfield was at most only a com-mon-law obligation, by the terms and conditions of which it merely was a . guaranty of the honesty or integrity of Hadfield, a fidelity bond, and that there was an express saving or exemption from liability for any loss that might have . been occasiOned by the deposit Of money in any banking institution.
ARK.] JONES V. HADFIELD: 997 We will attempt by our discussion to dispose of • all these Matters, not in the order named, for the reason that some of these matters have passed out of the case. The first proposition we .are to discuss is the one' of proper parties plaintiff in the liroseention of . the suit. COrine Jones and Arthur Jones were minor children of the former fireman who' -lost his life in the discharge of duty, and they claim the3 ., are the prospective recipients of relief froin the funds' sued for, but on account of the fact- that the money *as not paid over the relief has not been forthcoming, but has been . denied to them. Appellees, however, agree that the city is a proper party. In fact they argue that it is the only proper party. Before the•trial of this case, however . , the statutory trustees, who have control of the disbursement of this fund, were all made parties to the suit, joining the two Jones children, adopting their pleadings to a large' extent, and asking for recovery against Hadfield and snr-ety upon this bond, which recovery . meant, not that the Jones children, Or any other plaintiff, would- recover any money or he favored with the judgment for himself individually, but that such recovery .as was had mu -st be against the - -defendants to require reStoration of this-money to the particular fund in the custody. of the city treasurer. There is no necessity of an elaborate dis-: cussion .of this matter at this time. It could avail noth-. ing to decide the now mooted question of the propriety of permitting the Jones children to maintain the suit. If these children have in fact no interest in. the fund that matter will most probably be properly tested upon claims that they may make or present to the tyustees after the funds shall have been collected and .paid to the city treasurer. Bonds made by officials to the State or city may be sued upon by -any one interested. It is argued vigorously; by the . appellees that this is a. public fund belonging to the city of Little Rock..• Let it suffice to say that if it is such, it is one in which the city has a naked legal title with. no• beneficial interest whatever. It is true the treasurer is the proper 611S-todian of this fund. That is not disputed by any party. in interest, but the fund-does not-arise out of taxes,
298 JONES V. HADFIELD. [192 cense fees and such other sources of revenue as are under the control of the city government, composed of the mayor and city council. No part of these funds may properly be used by the city government for any purpose whatever. The- money creating this Firemen's .Relief Pension Fund arises out of the provisions of act No. 491 of- the Acts of 1921. The same act provides for the payment of .the money into the custody of the city treasurer,. makes it his duty to receive . the fund, and provides that his bond shall be liable therefor. Section 15 of act 491 of the Acts of 1921. • The- said act also provides for a board. of trustees, whose duties are defined by § 14. Any one interested in reading. the aforesaid act, and considering tbe provisions thereof must be convinced at once that the real custodians of the fund are the trustees and the city treasurer. It is conceded the city had a right to sue ; if so, it could re-. cover only for the proper custodians. Hence, the question of proper parties plaintiff is no longer of importance, as all interested parties were properly before the court at the time of the trial., The trustees sued for this money and, since the treasurer was not willing to become a partY plaintiff, properly joined him as a. defendant and any reCovery accrues for the benefit of the fund, but under the statute, it must be held by the defendant, Alexander, as city treasurer, Or his . successor in office. The bond executed by Hadfield, the city treasurer, had all of-the usual incidents and provisions of the 'statutory bond: In fact, it was such, but to it was added the following provision : "It is mutually understood and agreed between all parties hereto, that the said surety shall not be liable to said city of Little Rock, Arkansas, for any loss resulting to said city of Little Rock, Arkansas,- by reason of any public moneys bding now on general or special deposit or hereafter placed on general or special deposit by or on behalf of the said prMcipal with any bank, depository, or depositories; or by reason of *the allowance to or nc-ceptance by said principal of any interest thereon, any law, decision or statute of the State of Arkansas, or or-
ARK.] JONES V. HADFIELD. 999 dinance of the said city of Little Rock, ArkansaS, to the contrary notwithstanding ;" It is contended thatthe surety company was not compelled to execute a bond and that since it was willing to be sufficiently accommodating to make the bond for the treasurer, it had the right to say upon what conditions or provisions it would execute the instrument. The force of this argument must necessarily have an appeal to every fair-minded, thinking citizen. The right of freedom to contract is not one to be. dealt with lightly nor to be thwarted by specious judicial construction. The record does not disclose the fact, if it be one, that the surety would not have executed this bond without having added to it the saving or exemption provision above noted. It is argued, however, that such is the fact and that the City had full knowledge and information in regard to the attitude of the surety upon the bond, and accepted the bond and thereby agreed to this exemption or saving paragraph. We think, appellants might well have conceded this proposition in the presentation of this case upon trial and appeal. Such concession would not have operated to release or discharge the surety. - According to our comprehension, governments 'are instituted for the benefit of the governed, and the primary purpose of all government and the creation of offices is for the protection of the citizen in all his rights. Under this theory, bonds are required of those handlipg public funds, not for the benefit of the office-holder in whose possession the funds are placed, but for the . protection of the entire citizenship.- It is a matter of pub-. lie policy that security must be ( v iven as a condition precedent to a proper qualificationfor office and for the assumption of the responsibility thereof. The officeholder must yield obedience to the mandates of the law requiring him to give . security. If he be unwilling or able to do this, he cannot properly enter up6n the office in the discharge of his duties. Act 491 of the Acts of 1921 takes cognizance of the fact that the city treasurer must have a bond. See § 15. The ordinance is as follows :
230: JONES V: HADFIELD.' -[192 "City officers -bonds All:city :.officers herein-after mentioned that may be now or hereafter elected or. appointed, shall, before . entering- upon the discharge of their respective offices; -each. take. the : oath requireday law, and give bond, with good security, for the faithful discharge-of his- office and duty,' in the sum and amount as folloWs, to-wit: :* *-; the-,city treasurer, shall give such bond in the penal su-m of $50,000: : ".:* All of the bonds . provided;for. -in this 'section • shall,be made by some reputable surety. or bonding company and .the ,annual premiums shall be,.paid by .the city of Little .Rock . out. of the general . revenue -fund: * *., .Ord. September 8, 1886." . It is authorized,by.§ 7517, C. &M. Digest. The city council of Little .Rock had made due proyisions -for a bond . -by -the ordinance copied aboye. The foregoing facts, are taken from . pleadings and . agreed. statement of. facts. Other details,will be set out in . the discussion. . At the time, Hadfield ,qualified for office the mayor, members of the city council, nor any one else had any right,. power or sauthority to waive any proviSions of the statute or .ordinance thenin,foree.. We.arenot saying that . the city council may not haye,made, a different ordinance, nor are we saying that the Legislature may not have made a,,different prOyision,, but . there was no new ordinance and there was ,-no: new legislative act. This fact was ,known to, the-members of,the council and- also -to, Mr.. Hadfield,- and perhaps . better -known to the . surety upon Mr. Iladfield's, , hond, because-it attempted. to 6on-tret against the effect of ordinances, statutes, and decisions of the courts contrary to . the saving clause or exemption which is added to . the, bond. This- it was powerless to do. City officers Were.powerless to consent thereto. The bonding company waS-without power tolegislate by contract and behd the-law -so , as to conform to its desire, nor did , it have the power to reCall judicial deei. sions and -make them of no 'effect. The public policy which must govern is - declared by statutes and ordinances. - Officers .: who must make' bonds do so because required by law. -They and their 'sureties have 'as Much right to ignore the law as they have to waive its salient and salutory- provisions. No -.more:.
ARK.] JONES . 2) ' HADFIELD:• 231 . Appellees insist the' bOnd sued Upon in this case is not . a; statutory bond, such aS we have been discussing, but. a . common-law :obligation. Even so; he and his surety contracted "to.. account fOr all money coming into his hands, according , to law, etc. " The interests of.tho public justify the enforcement of , a common:law bond .when it has. been substituted for. a , statutory one. But even in a' common-law bond, ,we cannot give, effect to contractual provisions : and limitations in contravention of statutes and ordinances. "To account . f or the money that . came into his . hands according to ,. law'. means:that at the end of, his', term he,would pay over the' andolmt on hand to his sUccessor..„.11e will faithfully perform...all and singular the :duties incumbent npon him.7, is the measure of the obligation,. according to,law, and neither .one,. he nor the surety; can . contract, legally, to do . less: The• bond under consideration in the caseThf Fort Smith-Van, Buren Bridge Dist. v. Johnson, 181 Ark. 161, .S. , W. , (2d) , 417,, is a. good example of an enforceable connnonliaW obligation. , By , comparison of the language of the bond therein , and the one. under consideration here, the difference , become obviouS . . The conditions in the Johnson bond Were a part of it, but in the Hadfield bond the conditiOns :are in , Conflict with obligations. 'So if the aclded'or . 4Ue gtiOned 'part of the boii'cl; sUed upon be oinitthd 'as it ntiWt Was incensistent 'With* the. kind . of bond'author . ize . d and -Conteinplated' by law, then, 'there reinahs' the statUtorY bend: Bonds made by Officeis ar'e' statutery bondS. Int6 the'in .the , Statute' , is written. • In other . WOrds, all' 'of the conditiorisand stipfflations are gtatutory: 'What6ver 'else may be added, by Way-of liMitation'or inipairthent, must be deemed surphisage. Kans. as . City . Southern Co. V.112. S. Fidelity' & Guarantg Co:,'174 'Ark. 318,. 325,•295 S. W . 705; Phillip Corg Co. v. Maryland CaSualty Co., 201.1a, 4063, 206 Ni L.R. 495; Von Hoffman V. Quincy, 4 Wall. 535, 18 L. Ed. 403; Fogarty v.' Davis, 305 , Mo.. 288, 264 .S. W.-879 ; Duke . V.. National Surety 'Co., 131 Wash. 700, '230 Pac. 1.02; Continental Life Ins.' Co. v. Chamberlin; 132 • U:- S.-304, 10 S: Ct. 87; 33 'L. Ed. 341; 9 C. J• ; 35, 1 52 . C: J..1108, § 199; William.§on v. Williams,' 262
232 JONES v. HADFIELD. [192 Mich. 401, 247 N. W. 704, 89 A. L. R. 442; 443; August v. Collins, 260 Mich. 232, 244 N. W. 458 ; Chambers v. Cline, 60 W. Va. 588, 55 S. E. 999. Provisions in contravention of the statutes are void. Southern Surety Co. v. Cochine Co., 27 Ariz. 473, 233 Pac. 897; Davis v. West Louisiana Bank, 155 La. 245, 99 So. 207. Such provisions are surplusage. Limestone Co. v. Montgomery, 226 Ala. 266, 146 So. .607, 87 A. L. R. 164; Leach v. Commercial Savings Bank, 205 Iowa 975, 213 N. W. 612, 22 R. C. L. 497, § 177. The foregoing propositions are supported so generally and by so many of the highest courts of the country aS to admit no controversy as to their soundness. Both defendants became liable upon default, April 10, 1933, not for use of fnnds, or on account of embezzlement, or other shortage imputing culpable misapplication of fUnds. They are both insurers, the officer under the law, the surety by contract. Judgment of trial court is reversed, and judgment is entered here for balance of principal, $22,148.03, and. accrued interest at 6 per cent. till paid, with costs. SMITH, MOHANEY and BUTLER,. JJ., dissent. MCHANEY, J. (dissenting). I respectfully dissent from so much of the opinion of the majority as holds the appellee, Fidelity & Deposit Company of Maryland, liable on its bond in this case. The condition of the bond is as follows -: "Now therefore if the said principal shall well and faithfully perform all and singular the duties incumbent upon him by reason of his election or appointment as such treasurer of the city of Little Rock, Ark-ansas, except as hereinafter limited, and honestly account for all moneys coming into his hands as said treasurer of the city of Little Rock, Arkansas, according to law, then tbis obligation shall be null and void; it is otherwise to be and remain in full force and virtue. "This bond is executed by the surety upon the following express condition, which shall be condition precedent to the right of recovery hereunder : It is mutually nnderstood and agreed between all parties hereto that the said surety shall not be liable to said city of
ARK.] JONES V. HADFIELD. 233, Little Rock, Arkansas, for any loss resulting to said city. of -Little Rock, Arkansas, .by'reasOn of any public mon-eys being now on general or special deposit or hereafter, placed on general or special deposit, by or on behalf of the said principal with any bank, depository, or -depositories, or by reason of the allowance to or acceptance by said principal of any interest thereon, any law, decision; or statutes of the State of Arkansas, or ordinance of the said city of Little Rock, Arkansas, to the contrary notwithstanding." If the language, "except as hereinafter limited," in the first paragTaph above quoted, and that in the second and third paragraphs were .omitted r then we Would haVe a simple statutory bond. But the insertion ot said language in the bond conclusively negatives the idea that the surety intended to give a statutory bond, or to be bound at all events. In clear and unambignous language it contracted against liability for losS of funds on deposit in any bank: In Union Indemnity Co. v. CoVing . ton, 178 Ark. 533, 12 S. W. (2d) 884,.in a suit on a contractor's bond given in the cOnstruction of n Masonic Temple . at RuSsellville; We said: "But we cannot construe the bend here sued on to be A statutory bond, when its obligationS expressly negative that construCtion. This is not a 'case where the bond contains conflicting obligations ;. on the contrary, there is nothing in the bond to indicate that its protection inures to any one 'except the 'obligee, the Masonic lodge, and the recital is express that the surety shall be liable only to the obligee. Wo may constrne contracts,- but we have no -right io make them, and we.must therefore hold that the bond protects only the Masonic lodge, and the court was therefore in error in rendering judgment in favor of any of the interveners on the bond, and that judgment will be reversed and the. interVentions dismissed as to th . e . surety company Wallade. Equipment Co. v. Graves, 132 Wash..111, 231 Pac: 458; Massachusetts Ronding & Ins. Co. v. Hoffman, 34 G-a. App. 565; 130 S. E. 375. See also City of Erie, to use Schafer v. Diefendorf, 278 Pa. 31, 122 'Atl. 159." •
. 234 J ONES V. :HADFIELD: [192 • hi Fidelity- & Deposit 1.Conipany . of ,Maryland Crane Co., 178 . Ark. 676, 12 . S. W.•.(2d) 872, in a, suit on contractor 's: bond given in the construction :of a building at the University .Of ArkanSas, aftevreviewing nuth-ber , of • cases,- from otherjurisdictionS as well.Us chir own, the late. Chief. Justice . HART; ' speaking for the court, said: "Therefore; 'we think :it is more iii accord with , our previous decisions .on: the- subject . to: hold that the statute does not prohibit the. surety from . exectiting a bond expressly restricting its liability to the obligee of the bond, where, as . in this • case,. the , bond does , not contain, any covenant , showing ' that 'it .. -Was intended to be „ exeCuted in obedience fo the proVisions Of:the . statute, but . , .6n the other hand, expreSsly negatives that idea." , It is, true that the bonds construed in said cases. aye bonds of . contractors;, but , they were: req y dred . by, statute, particularly. in , the latter case, and : the statute,, §. 6913 of Crawford & 1\foses' Digest, `I'provides, in , effect,. thai whenever any public officer shalb , under the, laws . of this State, enter into , a-.contract in any sum . exceeding one hundred , 4ollars , with . any person for :the purpose of Constructing . any public..building,such officer shall take from the party contracted with a bond.with surety as provided in the statute, and that the bond, shall, be conditioned that such contractor . shall Tay , all,indehte,dness for labor and materials:furnished , said :building." : ' I can: see, no distinction between the statutory; requirement in. that: case. and it: the eaSe, at bar; .Section 7517, Crawford . & Moses! . Digest i provides that the eity council may require from :its . . officers . :a hond with good and sufficient security:for the faithful discharge of, thoir duties, .and §• 28,32 provides: that the treasurers of , cities inay deposit public fund's in their custody in, incorporated banks for safe keeping, and.they and the. sureties, on their official bonds shall be liable. ,.tThe question in this case is whether they shall be, liable . regardless of the provi,- slop. : Of the bond that the :surety will 'not be . liable .for money depOsited in any We think this cOuYt has ansiN ; ered thiS questiOn; in the case of a" public official, to the contrary . in the' Case of:Fort -thnilhAVan Buren
AR k..] JONES V. : HADFIELD '.. 235 Bridge District v. ,T'ohnson, 181 Ark. 161, 25 S. W. (2d) 417.• • • In:that cse,::the bridge district sued it§ collector Johnson,.andthe siirety en his official bond for an alleged shortage of . $1,260.67.. Before entenng von his duties as collector, 'he gaVe bond: to :• the, diStrict, as: he was:required 'to do'underthe statute' in the sunr of $10,000. The statute required the : collector to give bond "conditioned that they' will faithfully .. discharge the dirties of 'their office, and account for and:pay over all moneys that Come into • their :hands, according to law, and the order of the commisSion". He gave a : bond conditioned as follows.: ":We, William Dewey Johnson,. as principal, and the Ainerican Surety 'CoMpany of New York, as surety, bind ourselves lo :pay' Fort Smith . 86• • Van Buren' Bridge Dis7 trict, Fort Smith,. Arkansns, : as obligee, 'slich pecuniary loss, not exceeding ten thousand and no/100 . dollars, as the •latter •shall- have sustained . of money or • other . personal ;property by any act or acts of frand; dishonesty, forgery, theft, embezlement,' • 'wrongful • abstraction, •or willful misapplication :on : the : part' of the principal, directly or through conniVance with Others, :while holding the :position of collector . in ' the service of • the obligee." Johnsen and . the bending company • defended en 'the ground that the , shortage nileged was occasioned by the faCt that. said suni iof , money was stolen from his office, Without his :knowledge or consent and that the betiding company was not i obligated under the terms of the bond for property stolen ot wrongfully abstracted or willfully misapplied by' third perSons without kilowledgCbr consent of Johnson and : without hi's connivance. The bridge district contended that : the prevision nf the statute above qnoted. shotild' be . . read Mto: the bond. In affirming the jUdgment in:favor •of 'Johnsen : and the bonding company this court said: : "As far' aS the American Study . Coin-panyis concerned; the . enly important question presented for deterrnination -on this . appealc • is whether the bond sued upon'indemnified 'appellant against a loss or §hort-age.in' . the'account of:its collectorin any event, el-whether the•indemnity was ' restricted' to . a shortage or los§ in hiS accOmitS due to' a , willful • misapplication' of the : funds by
236 JONES V. HADFIELD. [192 him. Appellant contends that the trial court erred in restricting the indemnity to the terms of the bond because the statute creating the district provided for a bond to be given by the collector, 'conditioned that they will faithfully discharge the duties of their office, and .account for and pay .over all moneys that come into their hands, according to law, and the order of the commission' ; and that this condition shall be read into tbe bond, whether written :therein or not. The doctrine relative to indemnity bonds in this State, as announced in the cases of Union Indemnity Co. v. Covington, 178 Ark. 533, 12 S. W. (2d) 884, and the Fidelity & Deposit Company of Mary-land v. Crane Company, 178 Ark. 676, 12 S. W. (2d) 872, 874, is that where the statute requires the giving of such bonds the conditions contained in the statute will not be read into the bond, where 'the bond does not contain any covenant showing that it was intended to be executed in obedience to the provisions of the statute, but, on. the other hand, expressly negatives that idea.' In the instant case the obligations in the bond expressly negative the idea that it was intended as a statutory bond. It would do violence to the language of the bond itself to construe it as a. statutory bond, for the provisions of the bond negative any such construction." . As I construe this case it is directly in point with the case .at bar, and is an authority which must be overruled in order to hold appellee, Fidelity & Deposit Company of Maryland, liable in this case. Said appellee had all these cases before it in the preparation of its bond in the case at bar. It was the appellant in the Crane case, supra. It had a right to rely and did rely upon the authority in theSe cases in writing its bond in this case. To change this ruling now and hold said appellee liable would, in my opinion, violate the obligation of said ap-pellee's contract contrary to the Constitution of the United States and of this State. As said by Judge HART in the Crane case, supra: "The decision of the court in that case is in accord with our holding in the Covington case above cited. It is also in accord with the spirit of the decision in Reiff v. Redfield School Board, 126 Ark.
ARK.] JONES V.. HADFIELD. 237 474; 191 S. W. 16.* In that , case the court held that, in the—case of a . bond given by a contractor to . Secure school directors, who were held to be public Officers, the bond was executed pursuant to the statute and in : obedience, to it, and with the intention of comPlying with 'its termS, it was a statutOry bond, although it •did not strictly follow the provisions, of the . statute....If the court had meant to hold that our_statute impliedly prohibits the execution of any bond by public contractors except in obedience to the terMs of the statute, the court ,should have declarecl Rich to be the * legislative pfiblic policy in that case and have rested . its deciSion on . the gronrid that any bond executed by *public contractors . should be deemed to have been execnted in obedienee to the Statute, *and . that the Parties shOuld • have ' been Conclusiv , ely presnmed to have. intended the bond to be a • bOnd execnied in obedience to the statute." If we had held these eases, as .srigested by Judge IlAnT, that such a bond Was . eXecuted pursuant to the statute and in obedience to it,'find-that tbe Statute pliedly'prethibits the ex- cntion- Of . hily bond ' except in obedience to the terins of the stattite, 'then appellee wOuld have no room to complain.' Bfit . sinee we have 'held' eXpressly to the contrary, 'both as to' contractors ' bonds and official bonds, .We should not no* change the 'rule -and subjeCt said . appellee to a penalty which was speeifically exempted from the bond, under the authority of ofir own decisions. I therefore diSsent, and I am authori&d th say that Mr. Justice Smita and Mr. JUstice BUTLER concur in the views herein' eXpresSeth JOHNSON, C. J., (on rehearing). The importance 'of the legal questions.hivolved and the earnestness of' counsel in preSenting them on mOtion for rehearing basheceS-sitated a i!eview and reconsideration of a vast arraT of legal authority with consequent delay in final determina-•ion. From consideration of the ' majority' opinion it will be seen that the legal questions inVolved maY and should be: divided as folloWs First, is the bond . executed . by appellee' fidelity coMpany a. statutory or *cominon-law obligation? Second, if. statfitory; , should that portion ' of
238 JONES v. HADFIELD. [192 the bond in excess of the statute be treated as surplus-age? The city ordinance under which the bond was executed is set out in the original opinion and need not be repeated here: The bond executed by appellant surety and upon which this suit is predicated is as follows: "FIDELITY AND DEPOSIT COMPANY OF MARYLAND "Home Office, •Baltimore, Maryland "Arnount $50,000 No. " KNOW ALL MEN BY THESE PRESENTS, That O. D. Hadfield, Little Rock, Arkansas, as. principal (herein-after called `principal% and the .FIDELiTY AND DEPOSIT COMPANY OF MARYLAND, a corporation of the State of Maryland, having its pr . incipal office in the city of Balti-more, Maryland, as surety (hereinafter called `surety'), are held firmly bound into the "City of Little Rock, Arkansas, ill the penalty of FIFTY THOUSAND AND NO/100 ($50,000) Dollars, to the payment whereof, well and truly to be made and done, the said principal binds himself, his heirs, executors and administrators, and the said surety binds itself, its successors and assigns, jointly and severally, firmly by these.presentsi "Signed, sealed and dated this 31st day of March, A. D., Nineteen Hundr . ed . and Thirty-one. , "The condition of the aforegoing obligation is such, that. • "Whereas, the said principal was elected or appointed treasurer of the city of Little Rock, Arkansas, for the term beginning April 13, 1931, and ending April 13, 1933. "Now, therefore, if the said principal shall well and faithfully perform all and singular the duties incumbent upon him by reason of. his election or appointment as such treasurer of - the city of Little Rock, Arkansas, except as_ hereinafter limited, and honestly account for all moneys coming into his hands as said treasurer of the city of Little Rock, Arkansas; according to law, then this obligation shall be null and void; it is otherwise to be and remain in full. force and virtue.
ARK.] JONES V. HADFIELD. 939 • "This bond is executed by the. surety .upon the following express condition, which shall be..condition ,precedent to the right of. recOvery'hereunder.:.... "It is mttually, understood and agreed between-all parties hereto, that .the said surety shall not be liable to said city of Little Rock, Arkansas, for.any.loss.resulting to said city of Little Rock, Arkansas, by reason of any public moneys: being now on general or, special deposit or hereafter placed on general or special .deposit • by• or on behalf of .the said principal with any. bank depository, or depositories, or . by reason of the allowance to or 'acceptance by said principal of any interest .thereon, any law, decision, Or statute of the State of Arkansas, or ordinance of said city of Little Rock, Arkansas, to the contrary notwithstanding. "In testimony whereof, the said principal has here-unto Set his . hand 'and . s6al, and the said surety . has.caused this instrument of writing , to be signed ; by;its duly appointed attorney-in-fact and its corporate seat . to be hereunto affixed, the day and year first above written. • "0. L. Hadfield (SEAL) "Fidelity and Deposit .Company' of :Maryland, "Henry . SimpSon; AttOrney-in-fact, "Witness." . . The bond' reflects that.Hadfi6ld has been duly .electO or appointed as .treasuret of . Little Rock for the .tesrm beginning . April 13, 1931 . , . and ending April 13,. 1.933; .the *exact penalty required of the citY treasurer by t ' he City ordinance is likewise recited and provided for' . in the bond; and the bond expressly provides that "said principal shall Well and faithfully perfOrm all and .singular. the duties incumbent upon hini bY . reason of his . electiop or appointment as such treasurer of . the. city . .O• Rock, etc. ;" other covenants of the bond . appear tO 'lave been Made in strict compliance With the .. ordinanCe. mere casual reading of the bond down . to the'Point emption must . cOnVince any one that the; contraCting *parties had in mind strict compliance with the city ordinance and •the execution of a bond in conformitY thereto. Does the • exemption 'clause contained in the bond com-pel
240 JONES V. HADFIELD. [192 the conclusion that it IN.Tas not the intent of the contracting• parties I to exeCute a statutory bond? The exemption clause of the bond is the only basis for the contention that the bond is a common-law obligation. It is not claimed that 'the city officials who' participated in the execution and acceptance of the bond had any power or authority by city: ordinance to receive or accept any bond of the city treasurer other than the bond . provided for in the ordinance: Indeed ,it is and must be conceded 'that but One kind of bond is authorized by the Statutes of this State and the ordinances of Little RoCk promulgated thereunder for the • city treasUrer, ' namely ; one guaranteeing the faithful discharge of official duties and pay over to his successor in office all trust funds that come into his hands. Was this or somb other' kind of a bond executed?: It is :a fundamental:rule of law that the surety company well knew at the time of the eXecution of the bond what the law required; but yet they. . elected to execute a bond which had :all the' ear-marks , and characteristics of- a statutory bond with an unauthorized exemption clause. This unauthorized exemption falls within the well-recognized rule thai ; .sureties : upon an official bond by virtue of which the official has been inducted into office, cannot when called upon to answer for the official's neglect of duty . escape liability upon the theory that the pHncipal was not duly elected, appointed ,or 4ualified as 'such. See Meechein,' Public Officials, § 314; 2 Brandt, Suretyship ' and' Guaranty, § 521 ; Stat -e v. Bates, 36' Vt. 387; People v. Evans, 29 Cal. 429 . ; Byrne v. State, 50 Miss. 688; Tdylor v. State, 51 Miss. 79 Huhrer v. Baldwin, 137 MiCh; 263, IA N. W. 468 ; Board of Com. .of Hennepin Connty v. State Bank, 64 Minn. 19, 66 N. W. 143 ; Henry County v. SallUon, 201 Mo. 136, 100 S. W. 20. The city authoritieS being without . power . or an-thority to receive . or accept a city treasurer's bond other than one. conforming to and complying with the ordinance in this' respeet it f011ows that the ' bond in the instant caSe is a statutory bond ' or is no binding obligation whatever. Is the bond a nullity because of the unauthorized exemption Clause?' In Trustees of Bath v. McBride, 142
ARK.] JONES. V. ' HADFIELD'. 241 N. Y: S.1014; the court held . that where the form . of the statutory bond differed Trent that prescribed by the statute, if founded npon a good consideration, the liability of the surety should be determined by the statute . instead of the language of the . .obligation itself. In -Western Casualty and : Guaranty Insurance Company v. Board gf Commissioners, '60 Okla.' 140, 159' Pac. 655, the Snpreme CoUrt of Oklahoma stated the applicable . rule, reading from the second headnote aS follows : "Where the. de-positary bond executed ptirsuant to the provisions of said § 1540 contains the exact 'conditions imposed by the statute and' in addition Other conditions which are 'not ,provided . by. the Statute, tending to limit , or eVade 'liability, the bond Will be 'upheld as , to the conditions imposed by. statute; 'and' the other provis ' ions . will be treated a's. sur-plusage." • Many of the caSes cited in the originat.opinion kr6 tO the same effect *as those just cited and quoted froncand need not be restated here. It mi.-1st suffice to say thAtitis generally held that an Official bond that contain's the ekact requirement's of the . statute under which it is exéCuted andls followed. by other pi .oyisions notrequired or recognized by the g at-Lite that Such bond is . nevertheleSS statutory bond and the provisions of the bOnd aecord with the . statute should be treated aS Snrphtsage:. But it is 'contended by petitioners that the view here ancl in the original opinion eXpressed 'are in conffiet With' the oPithons in Union Indemnity Co v Covimyton, 178 Ar.Y.. 533, 12 S. W. (2d) '884; Fidelity' & Deposit co. y. CeKzne Co., 178 Ark. 676, 12 S. W. (2d) 872, and Ft: SMith-Van , uren Bridge District v. Johnson, 181 _Ark. 161, 25 , S. W. (2d) 417, upon which it relied , and' in reference to, which it contracted. - These cases afford but little support to petitionees positien when properly analyzed.. In the first' place.each of the bonds considered in the cases referred.to .w6re patently common-law obligations, made so by the•expres8 terms thereof, andwe expressly so decided. The bond .in the CoYington ease was entered into .between a building committee of A . Ma g onie 'Lodge, a . contractor ,and,a; surety
242 JONES 1).. HADFIELD.. [192 company and guaranteed performance of the contract by the contracter. No element of general public interest -in the bond was involved'; therefore, the case is no authority here. .In the Crane Company case this court expressly found that • the ;surety bond there considered contained no covenants showing that it • was intended to be executed in obedience to the provisions of the statute but expressly negatived that idea." See syllabus, 178 Ark: 676,. 12 S. •W. (2d) 872. The bond in the johnson case by its express terms only indemnified against "fraud, dishonesty, forgery, theft, embezzlement, wrongful abstraction or willful misappropriation of the district's fun& ; therefore, it contained no covenant or coVenants indicating that the bond was 'executed in compliance with the statute or by it authority. .Moreover, the improvement district involved is not sovereign and iMder. the Constitution . and law of , this State has none of the attributes OT . sovereignty. This will suffice as we believe, to show that. the cases referred • to are not controlling here. In the second place, the bonds considered in the cases referred te are merely private contracts as distinguished from official statutory bonds . or obligations and the same rule .of construction and application does not apply. This distinction has been expressly recognized by this court.in Little Rock Railway & Elect.ric Co. v. North Little Rock, 7. 6 Ark. 48, 88 S. W. 1026. The distinction has likewise been recognized by the Supreme Court of the United States ; see Hunter v. Pittsburgh, 207 U. S. 161, 28 S. Ct. 40; City of Trenton v. New. Jersey, 262 U. S. 182, 43 S. Ct. 534, 67. L. Ed. 937. Petitioner cites, and relies with confidence, u'pon.the cases of City of Sedalia, etc., v. American Surety Co., 82 Fed. 112. The covenants of the bond there considered were restricted by its terms to "Fraud, dishonesty, forgery, theft, embezzlement,. wrongful abstraction .or willful misappropriation on the part of the principal." This is exactly the obligations. we . considered in the John-son case, sUpra, and the Circuit Court of Appeals reached the identical conclusion reached- by us in the Johnson ease ; therefore, we have no quarrel with the opinion.
MIK.] JONES V. :HADFIELD. 243 Opinions from, other jurisdictions, notably South Dakota, are pressed upon us, but it must suffice to say that each of them may be differentiated either upon the facts or the fundamental law under • which the contracts were executed. • Petitioners also 'contend that if we adhere to our original -opinion its - effect is to impair the right to con-tract-as vouchsafed by -the 14th Amendment to th .e Federal Constitntion, and a great array of 'authority is cited in support of . this contention.- We do -not pause to discuss in detaillhe authorities cited becanse'as we perceive they have no application to the facts of this caSe. It is a fundamental rule of laW that the right of -the Sovereign power. to direct that which is for the . iVelfare of . the general public cannot be abridged or —contracted . away by See- 6 R. C.. L. 706 . , and cases there cited. There is uniformity Of • Opinion to the effect that contracts contrary to, or hi viblation of the Constitution or statutes of a State, are not enforceable. See 13 C. J., p. 255, and cases there cited ; also, see ilugusta Bank v. Earle, 13 Pet. 519, 10 L. Ed..274; Ogden v. Saunders, .12 Wheat. 213, 6 L. Ed. 606: Such being the law and we having determined that petitioner's bond is and waS intended to be by the parties, a statutory one it follows that the striking down of a - conflicting clause incorporated. therein contrary to the' statute does not infringe uPon the rights of the parties to contract as vonchsafed by. the 14th Amendment. To . ns the law seems to be . clear . that .,when..a sovereign, or :the representative thereof, contracts with a principal and his surety in . respect to -his Official dUties as a receiver of public funds -and a bond be executed employing . all _the' covenants required bY the statute but:containing a clause -exemption- from hability -not recognized by such statute,..such bond _should be treated as a statutory one and-. the exemPtion, being . in ex c -ess-of the Statute;,.treated as surplusage. The ride as thus formulated and , stated not only 'conforms tb the great:weight of American- authority on the subject but comports with sound reason' and logic. -
244 [192 Sovereign States and their . subdivisions can-act only through duly authorized and constituted agents. Taxes are an absolute necessity to a sovereign State's endurance and operation. The sovereign will and mandate must be adhered to, else by dishonesty or malfeasance of public officials the sovereign may be destroyed: In the instant case if the• city officials, admittedly without statutory authority, can contract away the city treasurer's and his surety's liability in respect to bauk deposits they may likewise dispense.with the necessity for any bond or surety, thereby imperiling the very existence of the sovereign. .Such is not the law or the announced public policy of this State, and we believe such construction would be a departure from established precedents, logic and reason. This was the original view, and after the most deliberate , consideration we adhere to. it. • .• The.motion for rehearing will be denied. Sl■TITH, MCHANEY and BUTLER, JJ., dissQnt.
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.