United States Fidelity Guarananty Company v. Riefler/Opinion of the Court

The facts certified are simple. One Dooling, being required to give an official bond, applied in Springfield, Illinois, to an agent of the plaintiff in error, a bonding company having its home office in Baltimore, Maryland, was informed that the company would become his surety only on condition that he furnish indemnity, and was handed a printed form of indemnity bond. The defendants in error, at Dooling's request, signed and sealed this bond for the purposes therein expressed, and authorized Dooling to deliver it to the company through its Springfield agent, which Dooling did. The agent, who is not shown to have had authority to execute bonds, forwarded it for acceptance. The company, relying upon it, became surety for Dooling. One of the recitals of the bond was that the company 'has become or is about to become surety, at the request of the said Frank E. Dooling, on a certain bond in the sum of Five Thousand Two Hundred Dollars, wherein Frank E. Dooling is principal, as Recorder of Springfield District Court No. 25, Court of Honor, located at Springfield, Illinois, a copy of which bond is hereto attached No. 52012-5, which bond is made a part hereof.' The condition was that Dooling should keep the company indemnified for all loss by reason of its suretyship. A copy of the company's bond was not attached and at the date of the indemnity bond had not been executed. Dooling was not a party to the indemnity bond. The defendants in error received no pecuniary consideration for their act and were not notified of the acceptance of their bond or of the execution of the other by the company. The questions propounded are: '(1) Was the instrument which was signed by Riefler and Hall, and relied on by the company, a completed contract of indemnity or guaranty? (2) Or was it merely an offer to become indemnitors or guarantors, requiring notice of acceptance by the company, in accordance with Davis v. Wells, F. & Co. 104 U.S. 159, 26 L. ed. 686, and Davis Sewing Mach. Co. v. Richards, 115 U.S. 524, 29 L. ed. 480, 6 Sup. Ct. Rep. 173? (3) And, if in substance the instrument was merely an offer, does the fact that it was in the form of a bond under seal take it out of the rule of those authorities?'

If the bond in suit had been delivered directly to the company and had been pronounced satisfactory there would have been no need to notify Riefler and Hall of the company's subsequently executing the Dooling bond. Riefler and Hall assumed an obligation in present words to indemnify the company against an exactly identified suretyship that the company had gone or was about to go into, as they stated. The company was about to go into it and went into it. If Riefler and Hall had made only a parol offer in the same terms, the company, by becoming surety, would have furnished the consideration that would have converted the offer into a contract; but notice is held necessary in Davis Sewing Mach. Co. v. Richards. If it had been a covenant, the company's act would have satisfied the condition upon which the covenant applied. O'Brien v. Boland, 166 Mass. 481, 483, 44 N. E. 602. As it was a bond, the company's entering into its undertaking in like manner furnished the subject-matter to which the obligation by its terms applied. In the case of either covenant or bond there was no need for notice that an event had happened that the defendants' contract contemplated as sure to happen, if it had not already come to pass.

The only ground for hesitation is that seemingly the bond in suit might have been rejected by the company as unsatisfactory, and that therefore it may be argued that Riefler and Hall were entitled to notice that it had been accepted. But we are of opinion that, in the circumstances of this case, it is reasonable to understand that they took the risk. They were chargeable with notice that by their act their bond had come to the hands of the company. The bond on its face contemplated that the company would accept it and act upon it at once, and disclosed the precise extent of the obligation assumed. It seems to us that when such a bond, carrying, as a specialty does, its complete obligation with the paper, is put by the obligors into the hands of the obligee, and in fact is accepted by it, notice is not necessary that a condition subsequent to the delivery, by which the obligee might have made it ineffectual, has not been fulfilled. The contract is complete without the notice (Butler's Case, 3 Coke, 25, 26b; Xenos v. Wickham, L. R. 2 H. L. 296, 36 L. J. C. P. N. S. 313, 16 L. T. N. S. 800, 16 Week. Rep. 38, 13 Eng. Rul. Cas. 422; Pollock, Contr. 8th ed. 7, 8), and we see no commercial reason why the principles ordinarily governing contracts under seal should not be applied (Bird v. Washburn, burn, 10 Pick. 223). In Davis v. Wells, F. & Co. the guaranty was an open, continuing one up to $10,000, but it was under seal, and was held binding, although additional reasons were advanced.

We answer the first question: Yes.

Mr. Justice McKenna dissents.