City of Hallettsville v. Long , 11 Tex. Civ. App. 180 ( 1895 )

Appellant instituted this suit against appellees as sureties on the official bond of its deceased tax collector to recover a sum of money, which it is alleged the collector received as taxes and failed to pay over.

The defendants denied that their principal had ever been the legal assessor and collector of taxes of the city, or that they had signed any bond given by him as such; but they admitted that they had signed the instrument sued on, which was attached to the petition, and which obligated the principal simply as collector. They further pleaded that for the term of two years before the execution of the bond sued on, their principal had held the same position, and during such time he became a defaulter to the city, owing it moneys which he had collected and failed to account for; that he was such defaulter prior to and at the time the bond sued on was given; that this fact was known to plaintiff and was unknown to defendants; that plaintiff did not remove him from the office, but, in order to induce defendants to sign the bond, through the city council, represented to defendants that the collector had discharged all of his duties with fidelity and was not in default with the city, but was worthy of full trust and confidence; and that defendants relied on these representations and were induced by them to sign the bond, which they would not otherwise have done. A demurrer questioning the sufficiency of the defenses set up was overruled, and the case was tried by a jury and verdict and judgment were rendered for defendants. The evidence showed that at the close of his term of office, from 1890 to 1892, the collector was a defaulter to the amount of several hundred dollars; that his accounts had been investigated and the fact of his defalcation reported and made known to the mayor and aldermen in April, 1892; that a written report, showing the state of his accounts, was on file and was printed in a newspaper, to which defendants were all subscribers, though they did not see this report or otherwise learn of the defalcation prior to signing the bond in August, 1892. No inquiry was made by them of their principal or of anyone else as to his standing with the city, and no representations were made to them on the subject. It does not appear that any of them were brought in contact with any officer of the city, except the collector, in the execution of the bond, and no concealment of the facts was made by any of such officers further than a failure to communicate them to the sureties may amount to concealment. The facts as to the shortage were ascertained by a comparison of the tax rolls, tax receipts, etc., with the payments and credits which the records showed in favor of the collector. There is nothing to show that access to these sources of information was denied to anyone. It is thus seen that the answer alleged positive misrepresentations by the officers of the corporation to induce the sureties to sign the bond, and the first question presented is whether or not the answer set up a good defense. Between private individuals there can be no doubt that such conduct as that alleged on the part of the obligee would constitute such a fraud as would, as to the sureties, avoid the obligation, the other essential facts being shown. Screwmen's etc. Assn. v. Smith, 70 Tex. 168.

In this case it is held that mere concealment by or failure of the obligee to communicate to the sureties facts known to him, but unknown to them, which show the moral unworthiness of the principal for the proposed trust, may be a fraud upon the sureties which will constitute a defense. That principle is declared as applicable to cases where the obligee is contracting for himself either in person or by agent. His contract is such as he makes it, and is affected by all infirmities which result from his or his agent's conduct. It is not so with officers of public corporations whose duty it is made by law to pass upon the sufficiency of the bonds of other officers. They usually act in the performance of duties imposed by the statute for the benefit of the people of the municipality. While for some purposes they are agents of the public, they are agents whose duty and authority are defined and limited by law. The nature of their duties and the extent of their authority are made known by the law to persons dealing with them. When the law requires of an officer the execution of a bond of a certain character, and makes it the duty of other officers to see that it is given and pass upon its sufficiency, no authority is given them to change its nature or impair its efficiency when given, by any stipulations or representations they may see fit to make. In substance and effect, such a bond is given to the public composing the corporation. The officers representing it are not the obligees and cannot control the effect of the bond, because their function is fixed by the laws on the subject. Hence, sureties who sign such a bond are not in the attitude of persons who sign as sureties for the performance of a private contract. They in fact make no contract with the officers representing the public, but assume an obligation to the public body, the effect and extent of which is regulated by law. It might be replied that the defense set up is not a stipulation, by which the bond intended by law was sought to be varied, but a fraud by which the officers induced the sureties to sign it. But, if a representation by the officers of the fact would bind the city, a stipulation by them that the fact existed as a condition of the bond would be equally binding. It would hardly be contended that the introduction of such a condition into the bond would be authorized on the part of the officers. If it were introduced, the sureties would not be liable contrary to its provision, but their non-liability would result from the limitation which they themselves put upon their undertaking, and not from any authority of the officers to so vary the terms of the bond. If the officers have no authority to bind the city by such a stipulation, it is hard to see how they can affect it by a representation to the same effect. The officer and his sureties give the bond required by law, and it must, we think, be held to have the effect and answer the purpose intended by the law. The true principle, it seems to us, is that the acts or frauds of officers in such matters outside the line of their duty as fixed by law are not to be imputed to the corporation, but are as the acts of third persons, not the obligees of the bond. This question was fully considered by the Supreme Court of Michigan in the case of Detroit v. Weber, 26 Mich. 284, in which three of the judges concurred in the view which we have taken, and the fourth (Judge Cooley) dissented from it. The authority of the case is weakened by the dissent of that eminent jurist, but the opinions of Judges Campbell and Christiancy, concurred in by the remaining judge, seem to us to state the correct rule, and support their position with reasoning of convincing force. The following authorities are to the same effect: Bower v. Com'rs of Washington County, 25 Pa. St., 69; Pine County v. Willard,19 Minn. 125; 39 N.W. Rep., 71.

The case of State v. Bates, 36 Vt. 390, also bears on the point, though the exact question was not involved, and there are some dicta which seem to intimate an opinion on this question contrary to that which we have taken.

We are therefore of the opinion that the facts stated in the special plea would constitute no defense to the action, and that the demurrer to it should have been sustained. It is well settled that the officer and his sureties are estopped from denying the regularity of his appointment. Whatever doubt there may be as to the sufficiency of the answer, it is clear that the evidence presented no defense. Under none of the authorities cited above could the facts shown by the evidence be considered a defense. The bond we hold to be a good statutory bond, though it was not given as marshal and assessor as well as collector. Under article 344, Revised Statutes, the office of assessor and collector had been, by ordinance, consolidated with that of marshal. Article 366 authorizes the city council to prescribe the form and amount of the bond. They took and approved this one and it must be held to be of the kind which they had prescribed. It was therefore authorized by the terms of the statute, though it secured the performance only of the duties of collector of taxes. It was less onerous than might have been exacted under the statute, but so far as its provisions went, they were in accordance with it. Had three separate bonds been required, one for the performance of the functions of marshal, another for those of assessor, and still another for those of collector, it could not be claimed that all of them would not have been authorized by the statute; and the fact that two of them were not taken, does not take that which was required out of the provisions of the law.

The judgment is reversed and the cause remanded.

Reversed and remanded.