Western Surety Company v. Childers , 372 P.2d 214 ( 1962 )

WELCH, Justice.

During the year of 1958, Hugh K. Clark obtained a license as a real estate broker from the Oklahoma Real Estate Commission. Western Surety Company executed with said broker its bond in the sum of $1,-000.00 as required by statute. Thereafter the eight defendants in error, each separately sued Hugh K. Clark, and Western Surety Company in Common Pleas Court of Oklahoma County, Oklahoma, for funds embezzled. Western Surety Company filed a complaint for interpleader, and joined with it an action for Declaratory Relief, under No. 8267 Civil in the United States District Court for the Western District of Oklahoma, and the actions against Western Surety were continued as to it. In the meantime judgments were rendered against Hugh K. Clark.

On the trial of the case of Interpleader and Declaratory Relief in Federal Court it was called to the attention of the court that the Supreme Court of Oklahoma had not passed upon the liability of the surety in such case. There being some question as to jurisdiction for Declaratory Relief the Federal Court case was dismissed. The cases in Common Pleas Court were then consolidated and certified to the district court of Oklahoma County, Oklahoma. It was stipulated by the parties that trial was only for the purpose of obtaining a Declaratory Judgment fixing the extent of surety’s liability on said bond.

The district court entered a judgment finding the Western Surety Company liable to pay not to exceed the sum of $1,000.00 on each of the eight judgments listed. The Surety Company, plaintiff in error, has perfected this appeal from said judgment.

The primary question to be determined is' the extent of liability of the Western Surety Company on the bond.

The plaintiff in error, Western Surety Company, contends that the trial court was in error in finding that each claimant was entitled to recover up to $1,000.00. It contends that its liability is limited to the sum of $1,000.00, and if the claims or judgments exceed that sum they must be prorated each receiving his prorata share of $1,000.00.

It is a well established rule of law that a surety or bondsman may only be held for the amount stipulated in the bond. 50 C.J. p. 74, Sec. 128; 21 R.C.L. p. 1085, Sec. 127; 72 C.J.S. Principal & Surety § 93, p. 573; Coast Surety Corporation v. White, 14 Cal.App.2d 35, 57 P.2d 951; Wiggins v. Pacific Indemnity Co. 134 Cal.App. 328, 25 P.2d 898; Witter v. Massachusetts Bonding and Insurance Company, 215 Iowa 1322, 247 N.W. 831, 89 A.L.R. 1065, and New Amsterdam Casualty Co. et al. v. Hyde, 148 Or. 229, 34 P.2d 930, 35 P.2d 980.

The bond under consideration was executed October 1, 1957, with an expiration date of December 31, 1958. It was conditioned that Surety should pay to the extent of $1,000.00 any judgment which may be recovered against principal for loss or damages arising from his activities as Real Estate Broker during the current license year.

Since this is a statutory bond, in order to determine the extent of the liability, the provisions of the Act under which the bond is given should be read into and become a part of such bond. Ellsworth v. Hurt, 158 Kan. 232, 146 P.2d 365.

The applicable statute is Title 59 O.S. 1957 Supp. § 848. It requires that as a condition of licensing the real estate broker or agent must file with the real estate commission a surety bond in the sum of $1,000.-00, which bond shall provide that the surety will pay to the extent of $1,000.00 any judgment which may be recovered against such licensee for loss or damages arising from his activities as such real estate salesman or broker.

The bond herein does not appear to be at variance with the statute.

Title 15 O.S.1951 § 373, provides:

“A surety cannot be held beyond the express terms of his contract, and if such contract prescribes a penalty for its breach, he cannot in any case be liable for more than the penalty.”

In construing this section along with others, the Federal Circuit Court of Appeals of the Tenth Circuit, in the case of Maryland Casualty Company v. Alford (Okl.) 111 F.2d 388, held a surety was not liable beyond the express terms of its contract, and that its liability was limited by the penal sum named in the bond. See, also Eckles v. Busey, 191 Okl. 644, 132 P.2d 344, and Allen v. Hartford Accident and Indemnity Co., 190 Okl. 313, 123 P.2d 252.

Defendants in error apparently rely on the rule expressed in Salo v. Pacific Coast Casualty Company, 95 Wash. 109, 163 P. 384, L.R.A.1917D, 613, and Paulsell v. Peters, 9 Wash.2d 599, 115 P.2d 708, both of which are Washington cases. The Supreme Court of Washington did not follow the generally accepted rule adopted in most jurisdictions in these two cases. In each one the court held that where more than one claim or judgment existed, the surety was liable on each one to the extent of the amount specified in the bond. It is obvious mat the court in the case of Paulsell v. Peters, supra, was following the view already expressed by the same court in Salo v. Pacific Coast Casualty Company, supra. Courts ixa other jurisdictions have not chosen to follow the views expressed in the Salo case. They have been very critical of it in expressing their views.

It has been held by this court that a contract of suretyship should be construed and applied strictly in favor of the surety and without an allowance of any implication against it. New York Casualty Company of New York v. Wallace and Tiernan, 174 Okl. 278, 50 P.2d 176; Enid Concrete Pipe and Stone Co. v. Mann, 174 Okl. 282, 50 P.2d 307; W. S. Dickey Clay Mfg. Co. v. New York Casualty Company of New York, 174 Okl. 281, 50 P.2d 325, and Aetna Casualty and Surety Company v. Tucker, 174 Okl. 343, 50 P.2d 339.

We agree with the defendants in error that the statute requiring a bond as a condition of licensing a real estate broker or agent was undoubtedly enacted for the protection of the general public, and should be liberally construed so as to carry out that purpose. However, that liberality of construction should not extend to placing burdens on an obligor that it did not assume in its contract. Recovery on the bond is not the only recourse the general public has against the real estate broker or agent.

The District Court of Appeals, First District, Division 2, California, in the case of Wiggins v. Pacific Indemnity Company, supra, had before it a question almost identical to the one here before us. The provisions of the statute which forced the controversy therein read (St.1923, p. 96, § 9a):

“ '* * * Any person injured by the failure of a real estate broker to perform his duties, or comply with the provisions of this act, shall have the right in his own name to commence such an action against said real estate broker and his sureties for the recovery of any damage sustained by the failure or omission of said real estate broker to perform his duties or either of them, or to comply with the provisions of this act or any of them. It shall be the duty of the real estate commission to see that such bond remains and is kept good.’ * * * ”

The pertinent provisions of the bond provided that any person injured by the failure of such real estate broker to perform such duties shall have the right to maintain an action against the broker and surety for the recovery of any damages sustained by the failure or omission of such broker, (emphasis by this court)

It is obvious that both the statute and the bond referred to in that case are very similar to the statute and bond involved in the case here. Especially as to the use of the word “any” which was construed by the trial court to mean “all” or “one or more” and apparently the basis of the trial court’s reason for finding as it did in the case here for review.

In the case above referred to the California court further said:

“In this connection we may refer to similar and contemporaneous legislation in order to determine the meaning of the Legislature. With this in mind, we find the general rule relating to the liability of a surety stated in section 2836 of the Civil Code as follows:

“ ‘A surety cannot be held beyond the express terms of his contract, and if such contract prescribed a penalty for its breach, he cannot in any case be liable for more than the penalty.’

“This principle is recognized in all our decisions. * * * This principle has been applied to other bonds required to be given for the faithful perform-anee of some obligation of a third party. * * *»

The above section of the California Code is very similar to our statutory provision. Title 15 O.S.1951 § 373, which is referred to in the early part of this opinion.

It is argued by the defendants in error that the Legislature intended for liability to be on all judgments when it provided in the statute for liability on “any judgment.” The only support for this argument is the rule of law established by the Supreme Court of the State of Washington, which obviously is not the generally accepted rule followed by courts of other jurisdictions; and the grammatical construction placed upon the word “any” by other courts in construing statutes.

We do not think that the legislative intent should be construed wholly upon the grammatical construction of any one word, but should be construed in a manner which would not be arbitrary, discriminatory and unreasonable.

Should the act be construed to mean that while the required bond purports to be in' the penal sum of $1,000.00 and in conformity with the statute which does not require any more than this sum, yet, after recovery for that amount, the obligors shall continue to be liable for other and additional amounts without limit, then the requirement would clearly be unreasonable. No surety could properly be expected to undertake such an indefinite and unlimited responsibility. Therefore such construction of this regulatory statute would defeat the purpose of the legislation intended to regulate the occupation of real estate brokers and agents.

Regulations of occupations which are arbitrary, discriminatory, and unreasonable are beyond the scope of legislation. In re Carlson, 87 Cal.App. 584, 262 P. 792.

Therefore, for the reasons here-inabove stated, we construe Title 59 O.S. 1957 Supp. § 848, to mean that Surety’s aggregate liability on this bond shall not exceed the penal sum stipulated therein.

Now we come to the question of determining how the $1,000.00 which constitute surety’s liability should be applied to satisfy surety’s obligation, since the total of all claims are in excess of $1,000.00.

Where bond is given to protect individual members of public who deal with principal and extent of surety’s liability is limited to certain amount and claims are made to surety in excess of penalty on bonds, total penalty should be prorated among claimants. New Amsterdam Casualty Co. v. Hyde, supra.

For the reasons herein stated this cause is reversed and remanded, with directions for the trial court to render judgment in accordance with the views expressed herein.

DAVISON, HALLEY, JOHNSON and JACKSON, JJ., concur. WILLIAMS, C. J., BLACKBIRD, V. C. J., and IRWIN and BERRY, JJ., dissent.