National Surety Co. v. Lanahan

Constable, J., delivered the opinion of the Court. This appeal is from a judgment recovered upon a bond, executed by the appellant, as surety for one Alexander Cuningham, principal therein. It appears from the record that Cuningham approached the appellees, private bankers and brokers of Baltimore, for the purpose of securing a loan of seventy thousand dollars. Cuningham was a coal-mine operator in the State of West Virginia, and owned all of the outstanding stock of a mining corporation of that State*, all of which, however, he had pledged with certain New York banks as collateral for large loans, and which he was desirous of paying off.

Accordingly, he and the appellees entered into a written agreement, whereby the appellees were to loan him the sum of seventy thousand dollars upon his promissory note, hut it was made a condition precedent to the loan that the payment of the note, according to its tenor, should be guaranteed by the National Surety Company of New York. The agreement provided for acquiring, through the proceeds of the loan, the stock pledged with the banks, and contained an option to the appellees in lieu of a cash repayment, which option, however, was not exercised. Before the Surety Company would execute the bond, it required that the stock about to be released by the banks should be repledged with it, together with other securities of Cuningham’s, including a mortgage on his residence, in order to indemnify it against loss. ⁵⁴⁴ Accordingly, a note for seventy thousand dollars, payable one year after date, was given by Ouningham to the appellees ; and the appellant did make, execute and deliver to the appellees the bond guaranteeing the payment of the said note,, at maturity. On the day after the note was due, the appellees notified, the appellant that Ouningham had failed to pay the note, and, therefore, -they called upon it, under the bond, to pay them the amount due.

On that same day, Ouningham wrote the-appellant that he- had not paid the note, and intended to deny liability upon the same, and notified it not to pay. it and not. to sell or otherwise dispose of the securities deposited with it. A few days later the attorney of Ouningham wrote the-appellant, giving in more detail the defense to be urged by Ouningham to any suit to be brought by the appellees- to enforce payment either from him or the appellant, and arranging that in the event- suit should be brought against the appellant, the attorneys for the appellant should defend the suit, but at the cost and expense of Ouningham. The appellant then wrote its Baltimore attorneys: “I have your letter of the 10th inst., and as much as we desire to do so, Mr. Ouningham’s position in the matter precludes us at this time from recognizing lanahan & Co.’s request for payment of Mr. Ouningham’s promissory note. * * * You may make known to Mr. Lanahan’s attorneys as much of the letter as you deem wise, but I know you will appreciate that in the light of the-two communications, photostat copies of which you will have upon receipt of the enclosure, it would be most unwise for us to take any step- in defiance of Mr. Cuningham’s instructions.” In the suit subsequently brought against the appellant, judgment was recovered for the full amount claimed, and this appeal taken therefrom. Tn the Court below there was the defense of fraud as well as that of ultra vires, but the issue of fraud has been withdrawn by the appellant, and the only question before us is whether o-r not the bond sued upon is ultra vires. ⁵⁴⁵ In our opinion, the charter provisions of the appellant render unnecessary a discussion of several- legal propositions which might arise under the facts as disclosed in this record, for it must be conceded, if the power to guarantee the payment of promissory notes can he found in the- charter the obligation sued on is not ultra vires.

The appellees offered in evidence a certified copy of the copy of the appellant’s amended charter as filed in the office of the Secretary of State as of the year 1912. The counsel for the appellant stated in open Court that that copy was the latest one as of file in the office of the Secretary of State. The appellant offered in evidence a certified copy of its charter as amended May 11th, 1914, and effective until June 21st, 1915, which amended charter was the one in effect at the time of the execution of the bond in question, June 20th, 1914,. but which had never been filed in this State with the Secretary of State. The similarity between the sections in the two amended