Fresno Enterprise Co. v. Allen

California Supreme Court Sep 26, 1885 No. No. 9862Published

Before: McKinstry

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Holding. The court held that the sureties on a corporate bond are not liable for defaults occurring after the expiration of the principal's original term, even if the principal is reappointed to the same position, as the bond's liability is limited to the term for which it was executed.

Issues

Whether sureties on a corporate bond are liable for defaults occurring after the expiration of the principal's original term of office.
Whether the reappointment of the principal as his own successor extends the liability of the sureties under the original bond.

Disposition. affirmed

Quotations verified verbatim against the opinion

“These private contracts are to be interpreted, like other private contracts, with reference to their language and the circumstances under which they were entered into.”

“When he began to act under the re-appointment the liability of defendants on the bond ceased.”

“A principal in a bond is no further bound than his sureties.”

Synopsis

Cokpokation—Secbetaby—Bond—Liability on.—In June, 1881, the defendant Allen w,is elected secretary of the corporation plaintiff for the term of one year, and until liis successor should be elected and qualify. He thereupon executed to the plaintiff a bond with sureties in the penal sum of 519,000, to secure the safe-keeping and payment to it of all moneys that might come into his possession as secretary, and not paid out in the due course of business. The by-laws of the corporation authorized the board of directors to remove at pleasure aU officers, and fix their terms of office. In June, 1882, Allen was re-elected, and the action was brought on the bond against him and his sureties to recover moneys alleged to have been misappropriated by him after his re-election. Held, that the action could not be maintained.

McKinstry, J. The action is on a bond, executed by the defendants, and which is in words and figures as follows: —

“Know all men by these presents, that we, William. II. Allen, as principal, and James E. Bowe and John Haley, as sureties, are held and firmly bound to the Fresno Enterprise Company in the penal sum of $10,000, to the payment of which we bind ourselves and each of us.

“Given under our hands and seals the 1st day of September, 1881.

“The condition of this obligation is such, that, whereas, William H. Allen is secretary of the Fresno Enterprise Company, and as such, has, or may have, the custody of the moneys of said corporation; now if said William H. Allen shall duly preserve and keep all such funds as may come under his control or into his possession, and pay over to said company all such funds as he may not pay out in the due and lawful course of business, then this obligation to be void; otherwise to remain in full force.

[seal.] (Signed):

[seal.]

“Wm. H. Allen,

“J. E. Bowe,

“John Haley.”

The complaint is : —

“First—On the 4th day of June, A. D. 1881, William H. Allen was appointed by the board of directors of said Fresno Enterprise Company, secretary of said corporation, to hold his office for one year and until his successor should be elected and qualified; that by the by-laws of said company the board of directors were empowered to appoint and remove at pleasure all officers, agents, and employees of the corporation, fix their tenure of office, prescribe their duties, fix their compensation, and require security for faithful service.

“Second—That at the annual election of officers in June, 1882, no successor to said Allen was elected, but he was con-[507]tinned as secretary until the further order of the board. A successor was elected and qualified in June, 1883.

“ Third—That after said Allen’s election, and about the 1st of September, 1881, said Allen, as principal, and said Bowe and Haley, as his sureties, executed and delivered to said company their joint and several bond or writing obligatory for the payment to said corporation of the sum of $10,000; and said bond had a condition thereunder written, which recited: 'That whereas said Allen is secretary of the Fresno Enterprise Company, and as such, has or may have the custody of the moneys of said corporation, now, if said Allen shall duly preserve and keep all such funds as may come under his control or into his possession, and pay over to said company all such funds as he may not pay out in the due and lawful course of business, this obligation to be void; otherwise, to remain in full force.’

Fresno Enterprise Co. v. Allen

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