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NORTH DAKOTA SUPREME COURT..

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brings them squarely within the terms of the bond, as partners.

Palmer v. Bagg, 64 Barb. 641; Bates, Partn. § 655, p. 688, and cases therein cited.

Mr. F. W. Ames, for respondents: The principals in the bond are Mike Arnestad and Ole Eggerud, copartners as Arnestad & Eggerud, and it is their fidelity, and that of their employees, and those to whom they may intrust the business of the appellants, that are expressly undertaken by the respondent sureties; the expression, "or either of them," as shown by the tenor of the whole bond imports nothing more than an intention to be responsible for the acts of either during the existence of the partnership.

PPEAL by plaintiff from a judgment of 2 Brandt, Suretyship & Guaranty, 2d ed. A1 the District Court for Cass County in fa-118; Simson v. Cooke, 8 J. B. Moore, 588; vor of defendants in a proceeding brought to Hawkins v. New Orleans Printing & P. Co. enforce a bond which had been given by de- 29 La. Ann. 134. fendants for the fidelity of a firm which had been appointed to act as agents for the sale of plaintiff's goods. Affirmed.

The facts are stated in the opinion.

Mr. Melvin A. Hildreth, for appellant: The defense of a dissolution of partnership is an affirmative defense, and must be proved by a preponderance of the evidence.

as to their status

The statements and declarations of partners or dissolution, or any change in their relationship, should be closely scrutinized when others may be injuriously affected by the establishment of any fact which such declarations or statements may tend to prove. They are interested witnesses.

Clinton Lumber Co. v. Mitchell, 61 Iowa,

132.

In this state the common-law rule that the contract of suretyship shall be strictly construed does not apply.

Rev. Code, § 4652.

The principle that the dissolution of a partnership releases the sureties upon a bond covering the acts of the partners, applies only where the bond covers the acts of the partners as partners only, and in those cases knowledge of the dissolution was generally brought home to the plaintiff. The case at bar is distinguishable, first, in that the bond herein is a joint and several bond and extends to the individual acts of Arnestad and Eggerud, or either of them or their employees, or the employees of either of them, or anyone to whom they or either of them, may intrust the business of the company while acting as the agents of the plaintiff; and second, the plaintiff had no knowledge of the alleged change in this partnership. See Palmer v. Bagg, 36 N. Y. 523; Hayden v. Hill, 52 Vt. 259.

The act itself of intrusting plaintiff's goods to Arnestad & Lindstorm by the firm of Arnestad & Eggerud without notifying plaintiff and without plaintiff's consent, was an act of misappropriation of plaintiff's goods which

*Headnote by CORLISS, J.

NOTE-The opinion of the court and the briefs in the above case seem to present very fully the authorities on the point in question as to the effect

A surety cannot be held beyond the express terms of his contract.

Rev. Code, 4651; Miller v. Stewart, 22 U. S. 9 Wheat. 680, 6 L. ed. 189.

A surety who guarantees that a firm composed of particular individuals will do certain acts or discharge certain duties, cannot be held liable where there is a change in the firm, although the firm name is not changed.

Dupee v. Blake, 148 Ill. 453; Barnett v. Smith, 17 Ill. 565; 1 Brandt, Suretyship & Guaranty, 2d ed. $118, etc.; Crane Co. v. Specht, 39 Neb. 123: Theobald, Principal & Surety, 72; Simson v. Cooke, supra; Kipling v. Turner, 5 Barn. & Ald. 261; Penoyer v. Watson, 16 Johns. 100; Shaw v. Vandusen, 5 U. C. Q. B. 353; White Sewing Mach. Co. v. Hines, 61 Mich. 423, and cases cited; 2 Kent, Com. 124; Backhouse v. Hall, 6 Best & S. 507; Manhattan Gaslight Co. v. Ely, 39 Barb. 174.

The fact that plaintiffs were not notified of the change is immaterial.

Birch v. De Rivera, 24 N. Y. S. R. 770; 2 Parsons, Cont. 505.

Corliss, J., delivered the opinion of the

court:

The object of this suit is to hold the defendants, as sureties upon a bond, liable for the embezzlement of one of the principals in such obligation. The Standard Oil Company, the plaintiff herein, having selected as its agents at Mayville, in this state, the firm of Arnestad & Eggerud, required of them a bond with sureties as a condition of shipping them its goods, to be handled by them as such agents at that point. In response to this demand the bond in suit was executed by the firm, and by defendquestion before us relates to the liability of the sureties. Their only defense is that the bond secured the honesty of only the firm, and that before the embezzlement in question took place Eggerud had withdrawn from the firm, and that at the time the money sued for was misappropriated the business of such agency was being carried on by Arnestad and Lindstrom.

ants Hanson and Gullicks as sureties. The sole

| of a bond for the fidelity of a partnership, so that no attempt will be made to annotate the case.

As the construction of the bond is involved, | & Eggerud, or anyone to whom they may inwe deem it necessary to quote it in full:

"Know all men by these presents: That we, Mike Arnestad and Ole Eggerud, copartners as Arnestad & Eggerud, principals, and John P. Hanson and C. Gullicks, sureties, are held and firmly bound unto the Standard Oil Company in the sum of five hundred dollars ($500), lawful money, to be paid to the Standard Oil Company, its executors, administrators, and assigns, for which payment well and truly to be made we bind ourselves, our heirs, executors, and administrators, severally and collect ively, firmly by these presents. The condition of the above obligation is such that if, through the neglect, carelessness, or inattention to the business of the said company by the said Arnestad & Eggerud, or either of them, or any of their employees to whom they may intrust the business of the said company, the company shall sustain any loss or damage, then the said Arnestad & Eggerud, and parties hereto sub scribed as sureties, shall indemnify the said company to the amount of this bond; and the subscribing parties also firmly bind themselves to sustain and pay the Standard Oil Company, not to exceed the amount of this bond, any loss resulting to the said company through the theft or fraud on the part of the said Arnestad & Eggerud, or anyone to whom they may intrust the business of the company. The direct purpose of this bond is to secure and indemnify the said company against any loss from shortage on account of stock not being properly accounted for, and loss on account of funds belonging to the said company being misappropriated by the said Arnestad & Eggerud, or either of them, or anyone to whom they shall intrust the business of the said company. If the said Arnestad & Eggerud shall faithfully and accurately perform the duties as agents for the Standard Oil Company, and shall correctly account for all stocks or funds belonging to the said company which shall be intrusted to him or his employees acting in his stead, whose acts he herein directly assumes, then the above obligation to be void; otherwise to remain in full force and virtue."

trust the business of the company." Again, the bond provides that. if the said Arnestad & Eggerud shall faithfully and accurately perform the duties as agents for the said Standard Oil Company, and shall correctly account for all stock or funds belonging to the said company which shall be intrusted to him or his employees acting in his stead, whose acts he herein directly assumes, then the above obligation to be void," etc. It is evident that the words, "to him or his employees acting in his stead, whose acts he herein directly assumes," were intended to express the plural instead of the singular. In preparing the bond, a blank was probably used which had been so worded as to apply to a single agent. Looking at the whole instrument, and interpreting it in the light of surrounding circumstances, we are unable to find in it any purpose on the part of the obligors to give, or on the part of the obligee to exact, security for the act of either partner after the partnership as such had ceased to act for the plaintiff. Had this been the object of the parties, an explicit provision to that effect could, and certainly would, have been incorporated in the bond. We are therefore forced to fall back upon the inquiry whether the law will imply any promise on the part of the sureties to be responsible for Arnestad's honesty after he had ceased to be associated with Eggerud in the business. On this point we have no doubt. A surety who engages to be responsible for the honesty of a firm may be entirely iniluenced by the consideration that one of the partners is a man of integrity, and of such strength of character, and such shrewdness and watchfulness in business affairs, that the risk of dishonesty from the action of the other partner, in whom the surety may place no trust, is reduced to the minimum. The sureties in this case may have been willing to become bounden for the fidelity of Arnestad & Eggerud while acting as a firm, and yet at the same time not willing to incur the hazard of obligating themselves as sureties of the partner Arnestad alone. Based upon such considerations as these, the rule of law has long been It is urged that by the use of the words “or established that the surety, standing upon the either of them" the parties intended to cover the very letter of his contract, may insist that he individual defalcation of either member of the cannot be held for aught that is done after the firm as well after the dissolution of the firm as dissolution of the firm, for which alone he bebefore. But we are unable to discover any came responsible. Backhouse v. Hall, 6 Best justification for such a construction of the in- & S. 507; Dupee v. Blake, 148 Ill. 453; 2 Bates, strument. We think that these words were Partn. §§ 648-655; Birch v. De Rivera, 24 N. employed (unnecessarily employed, it is true) to Y. S. R. 770. See also Penoyer v. Watson, 16 express what the law would have implied had Johns. 100; Crane Co. v. Specht, 39 Neb. 123; they been omitted; i. e., that both partners need Manhattan Gaslight Co. v. Ely, 39 Barb. 174; not join in the wrongful act to render all parties White Sewing Mach. Co. v. Hines, 61 Mich. to the obligation liable. The bond was given to 423; Barnett v. Smith, 17 Ill. 565; 24 Am. & secure the plaintiff from loss growing out of the Eng. Enc. Law, pp. 764, 765. The case of agency held by the copartnership, and there is Dupee v. Blake, 148 Ill. 453, so far as the prinnothing in its language to indicate that the ciple of law is concerned, presents the same parties were contracting with reference to a features as the case at bar. The court there possible dissolution of the partnership, and the said: "The rule is that, if a surety engages continuance of the agency by one of the firm. for an individual, the engagement is underOther provisions of the bond indicate the exact stood to extend to the acts of that individual reverse. The instrument declares that "the alone, and will not continue if he takes in a subscribing parties also firmly bind themselves partner. In other words, the surety for a sinto sustain and pay to the Standard Oil Com-gle individual is not liable for a partnership of pany, not to exceed the amount of this bond, which such individual is a member. A surety any loss resulting to the said company through who guarantees that a firm composed of parthe theft or fraud on the part of said Arnestadticular individuals will do certain acts or dis

charge certain duties cannot be held liable where there is a change in the firm, although the firm name is not changed. As the surety's liability is strictissimi juris and cannot be extended by construction, his guaranty to a partnership is extinguished if any partner is taken into or retires from the partnership, unless it appears from the terms of the instrument that the parties intended the guaranty to be a continuing one without reference to the composition of the firm. A party may be induced to become surety for the individuals who compose a firm because of his confidence in their integrity, prudence, accuracy, and ability as business men, but he cannot be presumed to have intended to become responsible for the possession of such qualities by some third person, who may be afterwards taken into the firm without his knowledge or consent. It is often in the power of one partner, by want of discretion or integrity, to ruin another."

We

for Mitchell on the bond, could not be liable to respond for the laches of the firm, for it would be the default of a different party from that for which they were bound. Mitchell was at liberty to employ such agency as he chose to assist him. He could pay assistants a stipulated salary, or compensate them with a portion of the profits of the business. It was a matter of indifference to the plaintiff, so long as Mitchell fulfilled all the stipulations of his agreement. If he employed unfit agencies, and thereby the property was squandered and lost, it was, so far as this plaintiff is concerned, the default of Mitchell alone, and he and his sureties must respond. If the fact that defendant took in a partner in conducting the business of the agency did enhance the risk of these defendants, as the sureties of Mitchell, it was not induced or recognized by the plaintiff, and was a matter over which the defendants had quite as much control as the plaintiff. Our attention has been called to certain de- think that the referee was right, under the cisions which it is urged with great earnestness circumstances of the case, in finding that are opposed to the authorities already cited, Mitchell was 'responsible for the acts of Clapp,' and we are requested to follow them as enun- as for any other agent or assistant that be emciating the sounder doctrine. These decisions ployed, in conducting the business of the are Palmer v. Bagg, 56 N. Y. 523, 64 Barb. 641; agency; and that money that came to the Hayden v. Hill, 52 Vt. 259. But, in our judg- hands of Clapp in the conduct of this business ment, these cases are plainly distinguishable by legal intendment came to the hands of from the case before us for final settlement. Mitchell. Palmer v. Bagg, 64 Barb. 641." Their facts were different from the facts of And in Palmer v. Bagg [56 N. Y. 525], the this controversy in vital particulars. The court said: "We do not think this sufficient to sureties there had become responsible for the change the relations between Fanning and the honesty of an individual agent. As the court plaintiffs. The latter did no act creating or recvery properly held, such sureties took the ognizing any change. The agencies or means risk, not only of their principal's honesty, but which Fanning employed to dispose of the also of the dishonesty of those whom he might machines after receiving them did not necesemploy in any capacity to assist him in the sarily interfere with the relations between prosecution of the business of the agency. him and the plaintiffs. Should he hire a subagent as an assistant, the ploy other persons to aid in the selling and pay sureties would still be bound. And so they them wages or a percentage, or a share of would remain liable if he should see fit to give profits as partners. So long as the plaintiffs such assistant an interest in the property of confined their dealings with him under the the business of the agency, provided the obli- power of attorney, they would not be affected gee did not deal with the new firm as agents, by any arrangements he should make." In and thus extinguish the original agency. The neither of these cases did it appear that the sureties in those cases undertook to guarantee obligee had dealt with the firm. Had this apthe fidelity of the agent to his trust, and there-peared, a different question would have been fore necessarily agreed to be responsible for presented, for then the sureties could have whatever he should do himself or through his claimed that their bond did not cover a partagents and employees. They agreed to as- nership agency, but only an individual agency. sume the risk of his integrity and his business And it is apparent from the language of the judgment in employing assistants in any ca- courts in these cases that this fact would have pacity. It is upon this ground that all these constrained them to hold that the sureties were decisions relied on by counsel for plaintiff pro- not liable. ceed. In Hayden v. Hill, 52 Vt. 259, the court said on this point: "(1) The report shows that Mitchell took in one Clapp as a partner, and that said agency was managed, and funds therefor received, during a portion of the time, by the partnership; and it is claimed that a portion of the funds from sales and leases of the property were received by Clapp, and never actually came into the hands of Mitchell. But the report further states that the plaintiff never recognized such partnership, and dealt solely with Mitchell. He refused even to receive a note indorsed by the partnership name. If the plaintiff had seen fit to have consigned the property to the partnership, and dealt with it in such manner that the firm of Mitchell & Clapp would have been the responsible parties in the accounting, these defendants, as sureties

He might em

Finally, it is said that it does not appear that the plaintiff knew of the withdrawal of Eggerud from the firmn, and that hence it follows that the old firm, as a firm, was still liable to the plaintiff for the funds misappropriated, no matter by whom they were embezzled. Upon this foundation plaintiff builds up the argument that, inasmuch as the principals in the bond are liable, so are the sureties. But this reasoning entirely misapprehends the nature of the obligation of the sureties in this case. By signing the bond, they did not, in effect, assert to the plaintiff that they would be bound whenever the principals in the bond were liable in any way to the plaintiff, whether because of their having embezzled the property, or by reason of the doctrine of estoppel which would seal their lips against a denial of

which might justify a recovery against the original members. There is no evidence here that he was aware of the change. He seems to have been as much without notice as the plaintiffs themselves. But were it otherwise, we may say, in the language of Lord Blackburn, Nothing is stated to show either that the defendant was under any obligation to inform the banking house of that fact or that he took any steps to conceal it.' At all events, his contract is to guarantee a copartnership firm composed of certain persons, and that contract cannot be altered or extended without his consent." See also Backhouse v. Hall, 6 Best & S. 507.

liability. They merely agreed to become re-ever, is not responsible for the state of facts sponsible for the fidelity of the firm so long as each of the members of the firm should remain in the business. They contracted to be bound for the acts of Arnestad so long as they could have the protection resulting from the association of Eggerud with him in the same business. But they did not guarantee the integrity of Arnestad alone, unwatched and influenced by Eggerud, who may have been the only person in whom they reposed any trust. If the plaintiff was ignorant of the change in the firm, so were the sureties; and, if the sureties have a right to stand upon the terms of their contract, then it behooved the plaintiff to ascertain at its peril whether all the persons for whom the sureties had become responsible still remained at the helm of the business of the agency. On this point the decision of the court in Birch v. De Rivera, 24 N. Y. S. R. 770, is decisive. The court there said: "The fact that the plaintiffs were not notified of the change is immaterial. They may have an action against the firm as it existed before the change because of failure to notify them of such change, or to publish the dissolution. That proceeds upon another principle, namely, the presumption attached to continuous firm dealings without notice. The guarantor, how34 L. R. A.

We are unable to agree with counsel for plaintiff that there is not sufficient evidence of the dissolution of the firm of Arnestad & Eggerud. The evidence on the point is very satisfactory. Nor do we find anything in the case to rebut it. The deficit sued for having resulted from misappropriation of funds by Arnestad after Eggerud had retired from the business, the district court was right in rendering judgment for the sureties on the bond. It follows that such judgment must be affirmed, and it is so ordered.

All concur.

END OF CASES IN BOOK 34.

RÉSUMÉ OF THE DECISIONS PUBLISHED IN THIS BOOK.

SHOWING the Changes, Progress, and Development of the Law during the Second Quarter of the Judicial Year Beginning with October 1, 1896, Classified as Follows:

I. PUBLIC, OFFICIAL, AND STATUTORY MATTERS.

II. CONTRACTUAL AND COMMERCIAL RELATIONS.

III. CORPORATIONS AND ASSOCIATIONS.

IV. DOMESTIC RELATIONS.

V. PERSONAL CAPACITY.

VI. TORTS; NEGLIGENCE; INJURIES.

VII. PROPERTY RIGHTS.

VIII. CIVIL REMEDIES; RULES AND PRINCIPLES.
IX. CRIMINAL LAW AND PRACTICE.

I. PUBLIC, OFFICIAL, AND STATUTORY MATTERS.

Legislative bodies.

Failure to enter the yeas and nays on legislative journals, as required by the Constitution on the second and third readings of a statute authorizing municipal indebtedness, is held fatal, although the speakers certify that the act was ratified. (N. C.) 487.

A proposal to hold a constitutional convention is held to be properly submitted to popular vote and to be properly made by joint resolution, and not in the form of an ordinary law. (N. D.) 97.

The distinction between a concurrent resolution of the legislature and a law is maintained in a case which holds that such a resolution ratifying an appointment by the governor is not express authority of law," within the constitutional provisions requiring such authority for any contract which can create a claim against the state. (Cal.) 262.

Licenses.

The constitutionality of a statute imposing the burden of a state license fee of $25 upon itinerant vendors of goods, and requiring a deposit of $500 as security, and then requiring a local license fee in every place in which goods are sold equal to the amount of tax on the value of the stock of goods at the ratio of the last tax assessment, is sustained, although the act is oppressive. (Vt.) 100.

Taxes and assessments.

Money of a nonresident deposited in a bank within a state, although mingled with trust funds, is held to be property within the state so as to be subject to the New York transfer tax act. (N. Y.) 235.

While expressing the opinion that the legislature has power to tax domestic judgments in favor of and owned by nonresidents, a Kansas case holds that the statutes mentioning judgA rule of procedure requiring two thirds of ments among other classes of personal propthe members of a branch of a municipal goverty to be taxed do not include judgments ernment in order to dispense with a reading of a proposed ordinance is construed to mean two thirds of the members voting, if they are a majority, and if a majority constitutes a quorum. (Md.) 469.

Eminent domain.

Payment into court of the amount of an award appealed from in eminent domain cases is held insufficient to satisfy a constitutional provision that just compensation must be paid or secured before the property is taken or injured. (Pa.) 439.

A railroad is held to be public and entitled to the exercise of eminent domain, although built for a few miles from a sawmill, through a timbered region where all who choose are entitled to ride upon it as passengers or to have freight transported over it, even if the number exercising the right is very small. (Or.) 368.

The authority given to a street railway company to cross any railroad is held limited to the right to cross on streets or highways where other provisions confine the street railway route to the established streets and highways. (Pa.) 572.

owned by nonresidents. (Kan.) 810.

Bonds of foreign corporations when deposited within the state, although owned by a nonresident, are held to be property within the state subject to the New York transfer tax act. (N. Y.) 232.

A distinction between bonds and stocks of a domestic corporation which are in the possession of a nonresident decedent at the time of his death in another state is made by holding that the stock, but not the bonds, constitutes property within the state subject to a transfer tax. (N. Y.) 238.

A taxation of the average amount of live stock received each week by dealers and usually sold one day after receiving is sustained under the Maryland statutes, although they intend to export a part of them and actually do export about two thirds of all that they receive. (Md.) 309.

A stipulation in a mortgage that the mortgagor shall pay all taxes upon the premises is held not to bind him to pay taxes required of the mortgagee under a subsequent statute. (Mich.) 308.

A constitutional limitation of the tax levy

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