Mr. Justice Sheldon
delivered the opinion, of the Court:
The first point made by the appellants is, that there ivas no delivery of the bond. The only two material witnesses upon the trial were the defendant Ira Holmes, the president of the bank as well as a director, and Gage. William H. Adams was one of the directors of the bank, and the bond is signed by all the directors except Adams.
The testimony of Holmes is, that Gage required a bond to secure his deposit with the bank, and he, Holmes, said that he would give the names of all the directors of the bank and Samuel J. Walker, and Gage said that would be entirely satisfactory, and witness then got the signatures to the bond, and Gage got it from him under these circumstances :—that Gage came to him and asked for the bond, and witness stated to him that the bond was not complete and not ready for delivery to him.,—that it lacked the signature of Adams; that Gage said he wanted to submit it to the finance committee, which was to meet that day; that witness gave him the bond to show to the finance committee, and he was to hand it back to witness, and Adams was to sign it, and it was to be delivered afterwards; that Gage did not bring it back, and witness never saw the bond afterwards until the trial, and never afterward had any conversation with Gage in regard to it.
Gage testifies that the proposal of Holmes was to give him a bond with all the directors upon it,—he does not recollect that Walker was to be upon it; that at the time he got the bond he thinks Holmes told him Adams’ name was not on the bond, and witness told him the bond was satisfactory to him and does not remember of having said anything more about it at that or any other time, and then he took the bond; that Walker was supposed to be worth $1,000,000 at that time. This is the testimony which is relied upon as proof of the nondelivery of the bond. The possession of the bond by the appellee Avas prima fade evidence of its delivery. The acquiescence in the retention of the bond by Gage Avithout afterward speaking to him upon the subject, is quite strong evidence, either that there Avas an unconditional delivery to Gage, or that if there Avas such a condition attached to the taking of the bond by Gage as testified to by Holmes, it was waived, or that it was one only for the interest of the obligee and to satisfy him, and not one which was considered as of importance to the signers of the bond to be performed before they were willing the bond should be delivered and have effect as their bond.
The question of the delivery was one of fact for the jury, and there is no sufficient reason for disturbing their finding under the evidence.
It is next urged, that the court below erred in refusing to allow the appellants to show the condition on which they signed the bond. They offered to show on the trial that at the time they signed the bond, they did so upon the condition explained to Holmes, who had the custody of the bond at the time, that it should not be delivered until it was signed by Adams.
The court refused to admit the evidence, and exception was taken. There was no offer to show that this understanding between the defendants was made known to Gage. This precise question was decided by this court in the ease of Smith v. Peoria County, 59 Ill. 412, where it was held to be no defence for a surety in a'bond, that he signed it on condition that it should also be executed by another person as a co-surety, before it should be delivered, and that in violation of such condition the bond was delivered to the obligee without having been executed by such other person, it not appearing that the obligee had notice of the condition. We are entirely satisfied with the correctness of that decision as founded on principles of sound policy and justice, and sustained by authority, and it must control and be held as decisive upon the present question. The court did not err in excluding the evidence. In support of the decision in Smith v. Peoria County, in addition to the authorities there cited, see Dair v. United States, 16 Wall. 1, Butler v. United States, 21 id. 272, Russell v. Freer et al. 56 N. Y. 67, and see Stoner v. Millikin, 85 Ill. 218.
Another and the most important ground of error insisted upon, arises out of the arrangement made between Gage and the bank, as testified to by the witnesses Holmes and Gage, in respect to the deposit, and Gage’s individual indebtedness. This is presented in a twofold aspect, as being a fraud upon the sureties, the makers of the bond, and as an illegal transaction. The question is raised upon instructions, and so is one of law, and not of fact upon the evidence. s
In the bearing upon the sureties, the objection is, that material facts were concealed from them at the time of the execution of the bond; that the bond itself implies a different transaction from the real one; that this invalidates the contract of suretyship.
It is said the transaction here presented to the mind of the surety by the bond was the well known and customary one of depositing money in a bank where the customer is at liberty to draw out his money at such times and in such sums as he pleases, where neither party is under any special obligation to the other; while in fact, an entirely different state of things existed. That the sum nominally on deposit was really ¡pledged to the bank to secure a debt of the depositor in a like amount, and his power to withdraw it depended upon his ability to pay that indebtedness. We do not see that this alleged arrangement that the deposit should remain as security for Gage’s private indebtedness stood in the way of drawing out the money at pleasure. The money was the city’s money, so known to the bank, and deposited as such. Gage had no right to pledge or in any way appropriate it for the security or payment of his individual indebtedness to the bank, which the latter must have, or ought to have known; and notwithstanding such alleged arrangement, Gage might have drawn his checks at any time upon the deposit, and if refused payment, the bank could at once have been made to refund to the city.
In order that failure to communicate a fact to a surety should have the effect of a fraud upon him-and vitiate the contract, it must, we conceive, be a fact which necessarily must have the effect of increasing the responsibility of the surety, or operating to the prejudice of his interest. The only way in which we can see how the arrangement alleged to have been had could have worked to the disadvantage of the sureties is, that it might have, as it probably did have the effect, to keep a continuous deposit on hand to the amount of the Gage indebtedness. But this was not the necessary effect.
The bond recognizes an existing deposit, and that there might be further deposits from time to time, and intimates no idea of any restriction in respect of amount. That deposit was $40,000 and so remained until the drawing out of the $25,000 June 30, 1873.
The testimony is that the amount of the city moneys on deposit in the different banks was large, $1,600,000, and that at the time the $25,000 was drawn, there were $400,000 or $500,-000 so on deposit.
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Mr. Justice Sheldon
delivered the opinion, of the Court:
The first point made by the appellants is, that there ivas no delivery of the bond. The only two material witnesses upon the trial were the defendant Ira Holmes, the president of the bank as well as a director, and Gage. William H. Adams was one of the directors of the bank, and the bond is signed by all the directors except Adams.
The testimony of Holmes is, that Gage required a bond to secure his deposit with the bank, and he, Holmes, said that he would give the names of all the directors of the bank and Samuel J. Walker, and Gage said that would be entirely satisfactory, and witness then got the signatures to the bond, and Gage got it from him under these circumstances :—that Gage came to him and asked for the bond, and witness stated to him that the bond was not complete and not ready for delivery to him.,—that it lacked the signature of Adams; that Gage said he wanted to submit it to the finance committee, which was to meet that day; that witness gave him the bond to show to the finance committee, and he was to hand it back to witness, and Adams was to sign it, and it was to be delivered afterwards; that Gage did not bring it back, and witness never saw the bond afterwards until the trial, and never afterward had any conversation with Gage in regard to it.
Gage testifies that the proposal of Holmes was to give him a bond with all the directors upon it,—he does not recollect that Walker was to be upon it; that at the time he got the bond he thinks Holmes told him Adams’ name was not on the bond, and witness told him the bond was satisfactory to him and does not remember of having said anything more about it at that or any other time, and then he took the bond; that Walker was supposed to be worth $1,000,000 at that time. This is the testimony which is relied upon as proof of the nondelivery of the bond. The possession of the bond by the appellee Avas prima fade evidence of its delivery. The acquiescence in the retention of the bond by Gage Avithout afterward speaking to him upon the subject, is quite strong evidence, either that there Avas an unconditional delivery to Gage, or that if there Avas such a condition attached to the taking of the bond by Gage as testified to by Holmes, it was waived, or that it was one only for the interest of the obligee and to satisfy him, and not one which was considered as of importance to the signers of the bond to be performed before they were willing the bond should be delivered and have effect as their bond.
The question of the delivery was one of fact for the jury, and there is no sufficient reason for disturbing their finding under the evidence.
It is next urged, that the court below erred in refusing to allow the appellants to show the condition on which they signed the bond. They offered to show on the trial that at the time they signed the bond, they did so upon the condition explained to Holmes, who had the custody of the bond at the time, that it should not be delivered until it was signed by Adams.
The court refused to admit the evidence, and exception was taken. There was no offer to show that this understanding between the defendants was made known to Gage. This precise question was decided by this court in the ease of Smith v. Peoria County, 59 Ill. 412, where it was held to be no defence for a surety in a'bond, that he signed it on condition that it should also be executed by another person as a co-surety, before it should be delivered, and that in violation of such condition the bond was delivered to the obligee without having been executed by such other person, it not appearing that the obligee had notice of the condition. We are entirely satisfied with the correctness of that decision as founded on principles of sound policy and justice, and sustained by authority, and it must control and be held as decisive upon the present question. The court did not err in excluding the evidence. In support of the decision in Smith v. Peoria County, in addition to the authorities there cited, see Dair v. United States, 16 Wall. 1, Butler v. United States, 21 id. 272, Russell v. Freer et al. 56 N. Y. 67, and see Stoner v. Millikin, 85 Ill. 218.
Another and the most important ground of error insisted upon, arises out of the arrangement made between Gage and the bank, as testified to by the witnesses Holmes and Gage, in respect to the deposit, and Gage’s individual indebtedness. This is presented in a twofold aspect, as being a fraud upon the sureties, the makers of the bond, and as an illegal transaction. The question is raised upon instructions, and so is one of law, and not of fact upon the evidence. s
In the bearing upon the sureties, the objection is, that material facts were concealed from them at the time of the execution of the bond; that the bond itself implies a different transaction from the real one; that this invalidates the contract of suretyship.
It is said the transaction here presented to the mind of the surety by the bond was the well known and customary one of depositing money in a bank where the customer is at liberty to draw out his money at such times and in such sums as he pleases, where neither party is under any special obligation to the other; while in fact, an entirely different state of things existed. That the sum nominally on deposit was really ¡pledged to the bank to secure a debt of the depositor in a like amount, and his power to withdraw it depended upon his ability to pay that indebtedness. We do not see that this alleged arrangement that the deposit should remain as security for Gage’s private indebtedness stood in the way of drawing out the money at pleasure. The money was the city’s money, so known to the bank, and deposited as such. Gage had no right to pledge or in any way appropriate it for the security or payment of his individual indebtedness to the bank, which the latter must have, or ought to have known; and notwithstanding such alleged arrangement, Gage might have drawn his checks at any time upon the deposit, and if refused payment, the bank could at once have been made to refund to the city.
In order that failure to communicate a fact to a surety should have the effect of a fraud upon him-and vitiate the contract, it must, we conceive, be a fact which necessarily must have the effect of increasing the responsibility of the surety, or operating to the prejudice of his interest. The only way in which we can see how the arrangement alleged to have been had could have worked to the disadvantage of the sureties is, that it might have, as it probably did have the effect, to keep a continuous deposit on hand to the amount of the Gage indebtedness. But this was not the necessary effect.
The bond recognizes an existing deposit, and that there might be further deposits from time to time, and intimates no idea of any restriction in respect of amount. That deposit was $40,000 and so remained until the drawing out of the $25,000 June 30, 1873.
The testimony is that the amount of the city moneys on deposit in the different banks was large, $1,600,000, and that at the time the $25,000 was drawn, there were $400,000 or $500,-000 so on deposit. This shows the extent of the responsibility which the sureties must reasonably have contemplated, and that a constant deposit of as high an amount as $40,000 could not have been unexpected; so that the non-disclosure of an arrangement that that amount was to remain in constant deposit, may be regarded as of but little import to the signers of the bond. It is said the deposit drew four and a half per cent interest, that this was not on the usual terms of making deposits in banks, and that it was only such deposits, on the usual terms, that the bond contemplated. Such deposits frequently are by agreement made to bear interest The terms of the bond are broad enough to include deposits of the latter class, and if the interest feature be an objection with the defendants it was their business to have found out how it was in this respect when they executed the bond. As one of the makers of the bond, Walker, was not a director of the bank, we have not relied upon the view presented on the other side, that this arrangement having been made with Holmes himself the president and one of the bank directors, and all the other makers except Walker being directors, the defendants had, or must be held to have had, full cognizance of the transaction. But this may not improperly perhaps be adverted to as a circuinstance in repelling the charge of fraud upon the sureties. We do not think the appellants have any just ground of complaint of the non-communication to them of material facts in the respect alleged, at the time of the execution of the bond, as being a fraud upon them, and reason for not being held bound.
As respects the illegality insisted on, it is contended that the bond was to secure a contract forbidden by statute, and is therefore void. It is claimed that the transaction between Gage and the bank was the crime of embezzlement as defined by section 31, chap. 5 of the charter of the city of Chicago. The crime of embezzlement as there defined is, the conversion by the treasurer to his own use in any way whatever, or the use by way of investment or loan, with or without interest (unless differently directed by ordinance or resolution of the common council) of any portion of the city money entrusted to him. There was no conversion of the money by the treasurer to his own use, nor investment of it; but it is said there was a loan of it, and various authorities are cited to show that a general deposit of money in a bank is in effect a loan,—as, 2 Chit. Cont. 278; Morse on Banks and Banking, 25-6; Marine Bank of Chicago v. Rushmore, 28 Ill. 463, etc.
Admitting that a general deposit of money with a bank is, in a strict technical and legal sense, a loan, it does not follow that that is the sense and meaning of the word loan as used in this statute. Such a deposit of money is not in the ordinary and popular sense a loan of the money, and we are satisfied that the words “loaning” and “loan,” employed in this statute, were used in their popular sense, and not in the strict legal meaning to include a bank deposit. It is not simply the loan of the money, but the “use by way of loan,” which is prohibited and made a penitentiary offence, and it can not be supposed that the use of the money by way of loan was considered as embracing the case of a deposit of the money in a bank for safe keeping. As said in Maillard v. Lawrence, 16 How. 256, the popular or received import of words furnishes the general rule for the interpretation of public laws as well as of private and social transactions. The crime of embezzlement denounced by the statute we do not regard as having been committed here.
The act recognizes the propriety of such a mode of keeping and taking care of the public funds, by deposit in bank under direction of the common council, as to the manner, conditions and rate of interest". It is insisted, that in the absence of such direction from the city, the deposit would be illegal, and that the bond providing for its return is also illegal. It is some evidence that Gage was not acting without authority of the common council in the premises, that he got the bond from Holmes for the purpose of submitting it to the finance committee of the common council. But if Gage did act without such authority, his doing so would seem to be a matter between him and the council, and that the absence of the authority should not relieve the bank of its duty to return the money when called for, or constitute a defence to the bond in suit.
The treasurer is further required by the statute to keep the city money separate from his own and not to use the same directly or indirectly, and it is said there was here a use of the money by the treasurer, by carrying his own paper in the bank with the deposit. The having of a deposit of that amount may have been an object of interest with the bank and have influenced the accommodation extended to Gage. But any agreement that this money of the city should remain and be held as security for the payment of Gage’s indebtedness would have been of no validity, and the agreement made, whatever it was, does not appear to have stood in the way of any call for the money, further than that it was suffered to remain until June 30, 1873, when $25,000 of the deposit was paid upon the check of Gage, notwithstanding the agreement, and that Gage then stood liable as guarantor upon the Heed & Sherwin paper.
True, Holmes says that he did not feel any obligation to pay it, but he thought it good policy to pay it, and paid it to save the credit of the bank.
This conclusion might well have been come to in view of such an agreement having no legal validity.
All the arrangement that there was seems to have been to let that amount of money remain on deposit if the bank would accommodate Gage. There was nothing in that, that interfered with the safe keeping of the money.
The interest appears to have been paid to Gage monthly until the bank suspended, which he may have misappropriated to his own use, but this so far as appears was without the knowledge of the bank.
There may have been irregular and censurable conduct of Gage in mixing up public with private business, but we can not think it should have the effect of vitiating this bond. Its condition requires nothing illegal, but guarantees that the bank shall simply perform its duty, which, in law, it Avas, in any event, bound to perform, viz, to pay over the city money thus being in deposit, to the city treasurer Avlien demanded. It Avas not part of any scheme to violate the law, or to misappropriate the public moneys, but a guaranty that the money should be paid over to the party to whom it rightfully belonged. If an illegal scheme had, in fact, been entered into, and the bank had obtained this money of the city wrongfully, it would not be contrary to laAv for the bank to pay back the money to the city through its legal representative, the city treasurer, nor for others to engage that it should do so. This was just AArhat the bank ought to do. There would arise an implied promise on its part to do it; and Avhy might not an express engagement by another person, that the bank should perform this, its implied promise, be valid? Authorities are not Avanting to the point, that money which has been paid on a contract prohibited by statute, may be recovered back. As in White v. Franklin Bank, 22 Pick. 181, it Avas held that Avhere, upon the deposit of money in a bank, upon an agreement that it should remain for a certain time, the agreement was illegal and void under the statute of the State, as being a contract by the bank for the payment of money at a future day certain, and that no action could be maintained by the depositor against the bank upon such express contract, but that he might recover back the money in an action founded on an implied promise. And in Curtis v. Leavitt, 15 N. Y. 291, where negotiable bank certificates of deposit for a loan payable on time, in violation of the statute in that respect, were given, it was held that the lenders were entitled to recover the money lent, and in reference to the question the court say: “ There can be no difficulty in a case like the present, for another reason; the bank had a right to receive money on deposit —that is, to borrow money payable on demand; and its contracts to borrow the money in question on time being void, the law may properly regard the money as deposited, and the bank as liable to repay it whenever called for. An express contract by parol to that effect would no doubt be valid.”
Here, there is but such an express contract for repayment. And see Bradley v. Ballard, 55 Ill. 413.
The principle “ ex turpi contractu actio non oritur” does not seem to us to have any just application to this case. The city was not the offending, but the wronged party, if wrong there was, and there is no reason why it should be mulcted by the destroying of its security, and the loss of its money. Whatever provision of the statute or principle of public policy is supposed to have been violated, was for the protection of the city, and the bond is in furtherance of the same purpose, the city’s protection.
The bond, though to Gage, was to him “as treasurer,” and was really for the benefit of the city, and the suit is being prosecuted for the use of the city. Though the enforcement of payment of the bond may inure to the benefit of Gage by the discharge of a claim to the city which he is under liability to pay, still, the object of the bond is for the city’s own benefit and protection. We can not think that there is any rule of law or principle of public policy which requires that it should be held that Gage, by any irregularity or failure in the discharge of his duty, or by any fraudulent or illegal collusion with the bank, has rendered these public funds incapable of being collected from the bank, or has rendered illegal and incapable of being enforced the very security taken for the protection of those funds, and to secure the safe return of the money to the city through its treasurer, and which it was the right and duty of the city council to exact.
As to the suggestion that there was no consideration for the bond, if it be admissible, as claimed, to deny the consideration under our statute, the deposit of the money and allowing it to remain as it did, was ample consideration.
The exclusion of the proffered evidence of the offer to Gage of the orders of the city of Chicago on its treasurer and money to the amount of the deposit, was manifestly proper. The orders were not legal tender and the city was not obliged to accept them.
It is objected that the verdict and judgment should have been as well against the defendant Butters, as against the appellants, inasmuch as his discharge in bankruptcy purports to discharge him from debts existing October 23, 1873, the time he was adjudicated a bankrupt, and that there was no breach of the bond until after that time. At the time of the trial, May 3, 1877, the estate of the bankrupt was still open, the assignee not discharged, and no dividend declared.
The Bankruptcy act provides, that when the bankrupt is bound as surety upon any bond, but his liability does not become fixed until after the adjudication of bankruptcy, the creditor may prove the same after such liability becomes fixed, before the final dividend is declared; and that a discharge in bankruptcy, duly granted, releases from all liabilities which -were or might have been proved against his estate in bankruptcy. U. S. Rev. Stat. §§ 5069, 5119. The liability on this bond became fixed January 1, 1874, no final dividend in his estate had been declared May 3, 1877, the time of the trial, and the liability might have been proved in bankruptcy at any time between the last two dates. His discharge released him from any liability which might have been proved against his estate in bankruptcy, and, therefore, from any liability on his bond.
The judgment must be affirmed.
Judgment affirmed.
Mr. Justice Dickey, having been of counsel for the city, took no part in the decision of this case.