WALKER and CONNOR, JJ., dissenting.
(141) The action was instituted by Thomas S. Rollins, present guardian of James Blaine House, against F. C. Ebbs, former guardian, and the sureties on his guardian bond, to recover for default of the principal. On the trial below at May Term, 1904, of the Superior Court of HAYWOOD County, there was a verdict of the jury on issues submitted, and judgment on the verdict for the penalty of the bond, to be discharged on the payment of $4,666.66 2-3 with interest, the amount of the default. On appeal to this Court a new trial was awarded, the majority of the Court holding that the verdict was inconsistent on material issues, the ChiefJustice and Associate Justice Douglas dissenting. See 137 N.C. 355. A petition to rehear has been formally allowed, and the case is again before the Court on this order.
After stating the facts: On the trial below the jury rendered the following verdict:
1. Did defendants, I. N. Ebbs, M. L. Duckett, D. P. Plemmons, J. M. Rector, and Jasper Ebbs make and deliver their bonds in writing to the State of North Carolina for the benefit of James Blaine House, as alleged in paragraph 3 of the complaint? "Yes."
2. Did defendant F. C. Ebbs, as guardian of James Blaine House, receive the sum of $7,000, property of his ward, as alleged in paragraph 4 of the complaint? "Yes."
3. Did defendant F. C. Ebbs, as guardian of James Blaine House, in violation of and in breach of said bond, use and appropriate to his own use the sum of $4,666.66 2-3 of his ward's money, as alleged in paragraph 6 of the complaint? "Yes."
4. In what sum, if any, is the plaintiff or the relators damaged because of said breach of said bond? "In the sum of $4,666.66 2-3, with compound interest from 8 March, until paid." (142)
5. Was the paper-writing or bond described in paragraph 3 of the complaint incomplete when delivered to the Clerk of the Superior Court of Madison, in that it contained no penalty, and in that the space where the penalty should have been written was left blank, as alleged in the further defense contained in the answer? "No."
7. Was the penalty $13,000 left out of the bond or paper-writing described in paragraph 3 of the complaint because of the mistake or inadvertence of the clerk of the Superior Court, as alleged in the reply of the plaintiff? "No."
9. Was it the purpose and intention of the defendants, at the time of assigning the paper-writing introduced in evidence, that the same should be used and filed as a guardian bond by F. C. Ebbs as guardian of James Blaine House? "Yes."
10. Was the penalty inserted in the paper-writing, purporting to be a bond, at the time Jasper Ebbs signed the same? "No."
11. Was the penalty, $13,000, inserted in the paper-writing, purporting to be a bond, at the time the defendant Plemmons signed the same? "No."
12. Was the penalty, $13,000, inserted in the paper-writing at the time M. L. Duckett signed the same? "No."
13. Have the defendants, Jasper Ebbs, M. L. Duckett, D. P. Plemmons, or either of them, since the signing of the paper-writing or bond, authorized any one to insert the penalty, $13,000, in said bond? "No."
In the former opinion, a majority of the Court held that according to the verdict on the last four issues the bond was void, and that such finding was inconsistent with the verdict on the first, fifth, seventh and ninth issues, which in effect declared it to be a valid and binding bond.
(143) It is undoubted law that if this verdict is necessarily inconsistent as to material issues, a new trial must be awarded; but a majority of the Court are now of opinion, maintained by the Chief Justice in his full and forcible dissenting Opinion, that the verdict is not inconsistent on any material question, and that the plaintiff should have a judgment in his favor, as heretofore entered in the court below. It is a settled principle that verdicts should be taken in their entirety, that all material facts found should be considered and liberally and favorably construed with a view to sustaining them, if it can be done. Thompson on Trials, sec. 3654.
A fair interpretation of this verdict establishes the facts that the defendants signed and sealed this bond, intending to make it the guardian bond of their principal, F. C. Ebbs; that they were to turn it over to their principal or one of their cosureties, or some one intrusted by them for the purpose, to be delivered as a guardian bond; that the same was complete in all respects when they signed it and turned it over for delivery, except as to the amount of the penalty; and that some one inserted the penalty and delivered the same to the clerk as a complete bond, and that the clerk was not aware, at the time he received and approved the same, that any change in the bond had been made. The fact that it was delivered by some one to whom they had intrusted it for delivery necessarily follows from the verdict of the jury on the first and ninth issues, that these defendants had caused the paper-writing declared on to be delivered as a guardian bond, and intended it should be so considered and filed when they signed it.
This interpretation is confirmed by the testimony of the defendants, which shows that I. N. Ebbs, a cosurety, and brother of the former guardian, and also a notary public, carried the bond to the clerk, complete in form, with the penalty inserted and acknowledged and justified before himself as a notary public by the principal and other sureties, and he acknowledged and justified before the clerk.
(144) The Court does not think that there is anything here inconsistent with the verdict on the last four issues to the effect that the penalty was not in the bond when the sureties signed it, and that, since signing, they have never authorized any one to insert the penalty. When these sureties signed the bond, except the penalty, and intrusted it to another for delivery, intending it to be used as a guardian bond, they gave such person implied authority to do what was necessary to make it a complete bond. They enabled their principal, in this way, to qualify as guardian and to take charge of the fund, and this end having been accomplished and the fund thereby obtained and dissipated, when called on for a reckoning they will be estopped to show that it was not their bond. There was an implied authority to fill out the bond and deliver
it in its completed form, and when it was so delivered and accepted, without notice or knowledge on the part of the clerk that any change had been made in it, the sureties who signed the bond under such circumstances will not be heard now to say that they are not bound by its provisions. It is no answer to this position to declare or prove that, since signing, they had never given any one authority to put in a penalty. They turned over the bond to the principal or some one for him, clothed him with apparent authority to fill up the bond, impose it on the clerk as a completed instrument and thereby obtain the fund.
In Murfree on Official Bonds, 168, the doctrine as to such instruments is stated as follows: "It is a well-established general rule that irregularities in the execution of official bonds do not affect their validity unless they are known to the obligee. Among other irregular practices, that of executing bonds in blank by sureties falls within this rule.
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WALKER and CONNOR, JJ., dissenting.
(141) The action was instituted by Thomas S. Rollins, present guardian of James Blaine House, against F. C. Ebbs, former guardian, and the sureties on his guardian bond, to recover for default of the principal. On the trial below at May Term, 1904, of the Superior Court of HAYWOOD County, there was a verdict of the jury on issues submitted, and judgment on the verdict for the penalty of the bond, to be discharged on the payment of $4,666.66 2-3 with interest, the amount of the default. On appeal to this Court a new trial was awarded, the majority of the Court holding that the verdict was inconsistent on material issues, the ChiefJustice and Associate Justice Douglas dissenting. See 137 N.C. 355. A petition to rehear has been formally allowed, and the case is again before the Court on this order.
After stating the facts: On the trial below the jury rendered the following verdict:
1. Did defendants, I. N. Ebbs, M. L. Duckett, D. P. Plemmons, J. M. Rector, and Jasper Ebbs make and deliver their bonds in writing to the State of North Carolina for the benefit of James Blaine House, as alleged in paragraph 3 of the complaint? "Yes."
2. Did defendant F. C. Ebbs, as guardian of James Blaine House, receive the sum of $7,000, property of his ward, as alleged in paragraph 4 of the complaint? "Yes."
3. Did defendant F. C. Ebbs, as guardian of James Blaine House, in violation of and in breach of said bond, use and appropriate to his own use the sum of $4,666.66 2-3 of his ward's money, as alleged in paragraph 6 of the complaint? "Yes."
4. In what sum, if any, is the plaintiff or the relators damaged because of said breach of said bond? "In the sum of $4,666.66 2-3, with compound interest from 8 March, until paid." (142)
5. Was the paper-writing or bond described in paragraph 3 of the complaint incomplete when delivered to the Clerk of the Superior Court of Madison, in that it contained no penalty, and in that the space where the penalty should have been written was left blank, as alleged in the further defense contained in the answer? "No."
7. Was the penalty $13,000 left out of the bond or paper-writing described in paragraph 3 of the complaint because of the mistake or inadvertence of the clerk of the Superior Court, as alleged in the reply of the plaintiff? "No."
9. Was it the purpose and intention of the defendants, at the time of assigning the paper-writing introduced in evidence, that the same should be used and filed as a guardian bond by F. C. Ebbs as guardian of James Blaine House? "Yes."
10. Was the penalty inserted in the paper-writing, purporting to be a bond, at the time Jasper Ebbs signed the same? "No."
11. Was the penalty, $13,000, inserted in the paper-writing, purporting to be a bond, at the time the defendant Plemmons signed the same? "No."
12. Was the penalty, $13,000, inserted in the paper-writing at the time M. L. Duckett signed the same? "No."
13. Have the defendants, Jasper Ebbs, M. L. Duckett, D. P. Plemmons, or either of them, since the signing of the paper-writing or bond, authorized any one to insert the penalty, $13,000, in said bond? "No."
In the former opinion, a majority of the Court held that according to the verdict on the last four issues the bond was void, and that such finding was inconsistent with the verdict on the first, fifth, seventh and ninth issues, which in effect declared it to be a valid and binding bond.
(143) It is undoubted law that if this verdict is necessarily inconsistent as to material issues, a new trial must be awarded; but a majority of the Court are now of opinion, maintained by the Chief Justice in his full and forcible dissenting Opinion, that the verdict is not inconsistent on any material question, and that the plaintiff should have a judgment in his favor, as heretofore entered in the court below. It is a settled principle that verdicts should be taken in their entirety, that all material facts found should be considered and liberally and favorably construed with a view to sustaining them, if it can be done. Thompson on Trials, sec. 3654.
A fair interpretation of this verdict establishes the facts that the defendants signed and sealed this bond, intending to make it the guardian bond of their principal, F. C. Ebbs; that they were to turn it over to their principal or one of their cosureties, or some one intrusted by them for the purpose, to be delivered as a guardian bond; that the same was complete in all respects when they signed it and turned it over for delivery, except as to the amount of the penalty; and that some one inserted the penalty and delivered the same to the clerk as a complete bond, and that the clerk was not aware, at the time he received and approved the same, that any change in the bond had been made. The fact that it was delivered by some one to whom they had intrusted it for delivery necessarily follows from the verdict of the jury on the first and ninth issues, that these defendants had caused the paper-writing declared on to be delivered as a guardian bond, and intended it should be so considered and filed when they signed it.
This interpretation is confirmed by the testimony of the defendants, which shows that I. N. Ebbs, a cosurety, and brother of the former guardian, and also a notary public, carried the bond to the clerk, complete in form, with the penalty inserted and acknowledged and justified before himself as a notary public by the principal and other sureties, and he acknowledged and justified before the clerk.
(144) The Court does not think that there is anything here inconsistent with the verdict on the last four issues to the effect that the penalty was not in the bond when the sureties signed it, and that, since signing, they have never authorized any one to insert the penalty. When these sureties signed the bond, except the penalty, and intrusted it to another for delivery, intending it to be used as a guardian bond, they gave such person implied authority to do what was necessary to make it a complete bond. They enabled their principal, in this way, to qualify as guardian and to take charge of the fund, and this end having been accomplished and the fund thereby obtained and dissipated, when called on for a reckoning they will be estopped to show that it was not their bond. There was an implied authority to fill out the bond and deliver
it in its completed form, and when it was so delivered and accepted, without notice or knowledge on the part of the clerk that any change had been made in it, the sureties who signed the bond under such circumstances will not be heard now to say that they are not bound by its provisions. It is no answer to this position to declare or prove that, since signing, they had never given any one authority to put in a penalty. They turned over the bond to the principal or some one for him, clothed him with apparent authority to fill up the bond, impose it on the clerk as a completed instrument and thereby obtain the fund.
In Murfree on Official Bonds, 168, the doctrine as to such instruments is stated as follows: "It is a well-established general rule that irregularities in the execution of official bonds do not affect their validity unless they are known to the obligee. Among other irregular practices, that of executing bonds in blank by sureties falls within this rule. If a surety executes a bond of this character in blank and intrusts it to his principal, the latter is his agent and not the agent of the obligee, and the surety is fully bound by the acts and omissions of the obligor acting as his agent." And the same principle is set forth in general terms, 2 Cyc., 159: "If the party to an instrument (145) intrusts it to another for use, with blanks not filled, such instrument so delivered carries on its face an implied authority to fill up the blanks necessary to protect the same; and, as between such party and innocent third persons, the person to whom the instrument is so intrusted must be deemed the agent of the party who committed the instrument to his authority." Again it is said in the same volume at p. 161: "This implied authority to fill blanks is confined to such insertions as are necessary to make the instrument perfect according to its entire form and intended use." "This rule is founded," says the same authority, "not only upon that principle of general jurisprudence which casts the loss, when one of the two equally innocent persons must suffer, upon him who has put it in the power of another to do the injury, but also upon that rule of the law of agencies which makes the principal liable for the acts of his agent, notwithstanding the private instructions of the principal have been disregarded, when he has held that the agent had a position of more enlarged authority." This principle finds support in well-considered adjudications in this State and elsewhere. Gwyn v. Patterson, 72 N.C. 189;R. R. v. Kitchin, 91 N.C. 39; Humphreys v. Finch, 97 N.C. 303.
In R. R. v. Kitchin it is said that, "Where the bond is placed in the hands of a coobligor for delivery, without condition or instructions, and he subsequently erases the name of one of the signers before delivering it to the obligee and without his knowledge or consent, the bond is not vitiated." In such case the coobligor acts as the trusted agent of
his associate coobligors, and his abuse of the trust in altering the bond does not relieve them from liability upon the same. Ashe, J., in delivering the opinion, adds that it is sustained on another principle, "that where one of two persons must suffer loss by default or mistake of a third person, he who first reposed the confidence or by his (146) negligent conduct made it possible for the loss to occur, must bear the loss."
In Humphreys v. Finch, Smith, C. J., in upholding the principle here declared, quotes with approval two cases from the Supreme Court of the United States — Dair v. U.S., 83 U.S. 1, andButler v. U.S., 88 U.S. 272. Both were cases of official bonds, and are apt authorities for the position we here maintain. In Dair's case some of the sureties to an official bond were endeavoring to set up the defense that it was not to be delivered until executed by another surety, and it was held that such defense was not permissible to the surety. Justice Davis, in delivering the opinion, said: "Sound policy requires that the person who proceeds on the faith of acts or admissions of this character should be protected by estopping the party, who has brought about this state of things, from alleging anything in opposition to the natural consequence of his own course of action. It is accordingly established doctrine that whenever an act is done or statement made by a party, which cannot be contradicted without fraud on his part and injury to others whose conduct has been influenced by the act or admission, an estoppel will arise." And the judge further says that, "In the execution of the bond, the sureties declare to all persons, interested to know, that they were parties to the covenant and bound by it." In Butler's case this decision was applied to a case where every blank in an official bond was left in the form of a writing to be filled, and was filled by the principal in the scope of his apparent authority, and Chief Justice Waite in delivering the opinion, said: "The printed form, with its blank spaces, was signed by Butler (the surety) and delivered to Emory (the principal), with authority to fill the blanks and perfect the instrument as a bond. By inserting in proper places the amount of the penalty, Butler could have taken away from Emory the power to bind him otherwise than as specified. This, however, he did not do. Instead, he (147) relied upon the good faith of Emory, and clothed him with apparent power to fill all the blanks in the paper signed, in such appropriate manner as might be necessary to convert it into a bond that would be accepted by the Government as security for the performance of his contemplated official duties. It is not pretended that the acts of Emory are beyond the scope of his apparent authority. The bond was accepted in the belief that it had been properly executed. There is no claim that the officer who accepted it had any notice of the private
agreement. He acted in good faith, and the question now is, Which of two innocent parties shall suffer? The doctrine of Dair's case is that it must be Butler, because he confided in Emory and the Government did not. He is in law and equity estopped by his acts from claiming, as against the Government, the benefit of his private instructions as to his agent."
There are many decisions in other States to the same effect. Fullertonv. Sturgis, 5 Ohio, 529; S. v. Young, 23 Minn. 551; McCormick v.Bay City, 23 Mich. 457; Brown v. Colquitt, 73 Ga. 60; SouthBerwick v. Huntness, 53 Me. 89; Chicago v. Gage, 95 Ill. 593;White v. Duggan, 140 Mass. 18; Rose v. Douglas Township, 52 Kan. 451. In this last case the decision is as follows: "If a person signs his name as surety to an official bond, which is blank as to the amount of the penalty, and then intrusts such bond to another, and the same is afterwards filled up and then presented by the principal or any one for him to the proper officers for approval, and is accepted as an official bond of the principal, held, that such bond so accepted is prima facie evidence that it was filled up or completed with the authority of all the parties thereto; and further, that if such bond was afterwards filled up by inserting the amount of penalty therein without the authority, consent, or knowledge of the surety, such surety cannot complain, because by his own act or negligence he enabled the principal or some one for him to have such bond approved, accepted, and filed as an official (148) bond."
In McCormick v. Bay City, supra, it is said that "Where a person signs his name in blank as surety to an official bond and delivers it to his principal to have it completed and signed by others, and handed over to the proper authority, he makes that person his agent for the whole business, and is estopped and bound by his action, without regard to any secret instructions as to the conditions on which it should be completed and filed." Further, "Public officers, in receiving official bonds into their custody, are not bound to hunt up sureties and make inquiry of them. They have a right, where such action has been had, to rely upon their genuine signatures, voluntarily affixed to a regular document conforming to law."
There is nothing in the principle here declared that conflicts with the general doctrine which obtains in this State, that an agent, to bind a principal under seal, must have authority conferred by a writing under seal, and a sealed instrument which is changed by an agent, who has no authority by writing under seal, has no force to bind a principal. The doctrine, in these very terms, was approved by Chief Justice Smith inHumphreys v. Finch, supra, where he upheld the instrument on the principle of equitable estoppel. Nor is there anything in the decisions
of this State, cited in the former opinion, nor in any the Court can find, which forbids the application of the principle to the facts of the case the Court is now considering. In all of these it appears by express statement or by fair intendment that the obligee of the sealed instrument knew of the defect in its execution, or they were conveyances of real estate where the defect occurred in the line of a grantee's title, and such grantee was thereby affected with notice. In McKee v. Hicks,13 N.C. 379, the obligee knew that the bond was in blank and the same was filled out in his presence when he lent the money. Hall, J., in delivering the opinion, said that "Whatever injustice may be done to the plaintiff in this case is attributable to his own oversight in taking (149) a security for a debt which the law cannot recognize."
In Davenport v. Sleight, 19 N.C. 381, the defendant, desiring to buy a boat from the plaintiff, gave a sealed bond in blank to his agent and sent the agent to buy the boat. The plaintiff and the defendant's agent bargained, and having reached an agreement, the blank was filled in with the amount (evidently in the presence of the plaintiff). The bond was held void as a sealed instrument on the authority of McKee v. Hicks.
In Graham v. Holt, 25 N.C. 300, the defendant and one John Holt decided to execute their note to the plaintiff for the price of certain goods. The amount was contained in the inventory at John Holt's house, and neither of the three could remember it. The three being together, John Holt and the defendant executed a sealed note to the plaintiff, leaving the amount blank for John Holt to take home and fill up with the data which he had. This was done by him, and the bond delivered to the plaintiff. Here, also, the plaintiff knew of the defect.
In Blacknall v. Parish, 59 N.C. 70, the defendant desired to sell some land, drew a deed and delivered it, signed and sealed, to an agent, with the bargainee and the price left blank. The agent made a sale to the plaintiff at a reasonable price, filled in the blank with the name of the plaintiff and the price, both the "plaintiff and the agent supposing that the instrument thus made was a good deed."
In Cadell v. Allen, 99 N.C. 542, a deed for real estate was executed by one Cuthbertson under a power of attorney from Stephen and Thomas Lacy. The power of attorney was without seal, the defect was one in the line of the grantee's title, and he was affected with notice.
In Bland v. O'Hagan, 64 N.C. 471, it appears by fair intendment that the grantee knew of the defect — certainly, there is nothing to show the contrary — and in Barden v. Southerland, 70 N.C. 528, (150) which cites this last case as authority, it appears by express terms that the obligee of the amount knew that the amount was filled in by an agent acting under parol authority.
The Court has thus far found no case in this State which forbids the application of equitable estoppel to the facts established by this verdict.
Several of the authorities cited in support of the present opinion go to the extent of holding that where an official bond has been executed, knowing that there are blanks in it to be filled by inserting things necessary to make it a perfect instrument, the person who signs and seals under such circumstances shall be considered as agreeing that these blanks may be filled after he has executed the bond, and if the surety, relying on the good faith of his principal, shall permit him to have possession of the bond signed in blank, the surety will have clothed the principal with real authority to fill the blanks at his discretion in any proper manner consistent with the nature of the obligation. And this was no doubt in the mind of Justice Douglas when he stated in his dissenting opinion "that the bond is binding because it is a statutory bond, and, having been made and delivered for the purpose of carrying out the provisions of the statute, carried with it the inherent authority to insert such amount of penalty as would meet the statutory requirement." So stated, the doctrine would uphold the bond, even if the penalty required by the statute had been filled in by the officer who took it. But the Court does not decide this question here, as the facts of this case do not present it.
The Court is of opinion that the defendants are estopped to deny their obligation on the bond as filed and accepted by the clerk; that the verdict is not inconsistent on any material question, and that the original judgment of the court below be affirmed.
Petition allowed. (151)