SUPERVISORS OF CARROLL Co. v. U. S. Ex rel. Reynolds.

[No. 2.

Vol. I. inference instead of being plainly expressed. The powers committed to the county board were declared in the statutes relating to it and to its duties. If others were intended to be given, it is strange, to say the least, that the gift was not made when the legislature had the subject of the board and its powers under consideration. And if a special tax to pay a judgment was contemplated, it is hard to see why it was not provided for when the legislature had the subject of special county taxes before it, and when provision was made for levying such a tax, to pay depreciated county warrants, if approved by a popular vote. We do not propose, however, to discuss the question now. It has already been answered, and we must accept the answer. The supreme court of Iowa has decided in several cases that section 3275 confers no independent power to levy a specific tax in order to pay a judgment recovered against a municipal corporation, and that when the power has not otherwise been conferred it is not given by that act. This was decided in 1863, in the case of Clark, Dodge & Co. v. The City of Davenport, 14 Iowa, 494, before any of the warrants were issued upon which the relator's judgment was founded, and the construction then given to the statute has been repeatedly asserted and consistently maintained. It is, therefore, and it always has been the settled law of the State. That the construction of the statutes of the State by its highest courts is to be regarded as determining their meaning, and generally as binding upon the United States courts, cannot be questioned. It has been asserted by us too often to admit of further debate. (See numerous cases, Bright. Fed. Dig. 163.) We have even held that when the construction of a state law has been settled by a series of decisions of the highest state court differently from that given to the statute by an earlier decision of this court, the construction given by the state courts will be adopted by us. Green v. Neal's Lessee, 6 Pet. 291; Suydam v. Williamson, 24 How. 427; Warren v. Leffingwell, 2 Black. 599. And we adopt the construction of a state statute settled in the courts of the State, though it may not accord with our opinion. McKeen v. Delancy, 5 Cranch, 22. There every reason for this in the consideration of statutes defining the duties of state officers. It is true that when we have been called upon to consider contracts resting upon state statutes, contracts valid at the time when they were made according to the decisions of the highest courts of the State, contracts entered into on the faith of those decisions, we have declined to follow later state court decisions declaring their invalidity. But in other cases we have held ourselves bound to accept the construction given by the courts of the states to their own statutes.

is

It is insisted, however, that in Butz v. The City of Muscatine, 8 Wallace, 575, this court ruled that section 3275 of the Code did give power to the city council of Muscatine to levy a special tax beyond the statutory limit of ordinary city taxation, sufficient to pay a judgment which had been recovered against the city. This is true. But the facts of that case must be considered. The judgment had been recovered upon bonds issued by the city in 1854. At the time they were issued, no decision had been made by the supreme court of the State, to the effect that section 3275 was not an enabling statute authorizing a tax beyond that allowed by other statutes. It was not until nine years afterwards

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SUPERVISORS OF CARROLL Co. v. U. S. EX REL. REYNOLDS.

[No. 2.

that the supreme court of the State was called upon to determine its meaning. Hence this court felt at liberty to adopt its own construction and apply it to the case of the holder of the bonds, though it was adverse to that announced by the state court, years after the bonds had been issued. But at the same time it was said, "If the construction given to the statute by the state court had preceded the issuing of the bonds and become the settled law of the State before that time, the case would have presented a different aspect."

In the case we have now in hand, it appears that the warrants upon which the relator recovered his judgment not only were for the ordinary indebtedness of the county, but that they were issued after it had become the settled law of the State, announced in the decisions of its highest court, that the section of the statute relative to executions now under consideration did not enlarge the authority of a county board of supervisors, and did not authorize the levy of a tax beyond that provided for in section 710, that is a tax in excess of the writ of four mills on the dollar. The holders of the warrants were therefore informed when they took them, that by the laws of the State no special tax could be levied for their payment, unless the question whether such a tax might be levied should first be submitted to the people and by them answered in the affirmative, according to the directions of sections 250 and 252, to which reference has heretofore been made. In this particular, the case differs from Butz v. Muscatine. Looking at the difference, we think there is no sufficient reason why we should now depart from the construction which the courts of the State have uniformly given to its statutes.

It follows, that in our judgment the return to the alternative mandamus was a sufficient return; that the respondents had no power to levy the special tax called for; and as a writ of mandamus can compel the performance only of some act which the law authorizes, that the demurrer to the return should not have been sustained.

Judgment reversed and the record remitted, with directions to give judgment on the demurrer for the defendants below.

Mr. Justice CLIFFORD, dissenting. I dissent from the judgment of the court in this case, holding that this court should adhere to its former decision, as it appears that the state statute when the bonds in that case were issued had not been construed by the state court.

Where the construction of a state statute is involved in a case presented here for decision, and it appears that the statute in question has not been construed by the state court, I hold that it is the duty of this court to ascertain and determine what is its true construction; and that this court under such circumstances will not reverse its decision in the same, or a subsequent case, even though the state court may afterward give a different construction to the same statute.

Mr. Justice SWAYNE also dissents from the judgment upon the same ground.

Vol. L]

NASH V. FUGate.

[No. 2.

SUPREME COURT OF APPEALS OF VIRGINIA.

[JANUARY, 1874.]

BOND. LIABILITY OF SURETIES WHERE CONDITION AS TO DELIVERY

Held: that a surety upon a bond delivered by the obligor to the obligee, the face of which is such as to excite no suspicion, is estopped to deny the validity of the same on the ground of an antecedent agreement touching the delivery.

A signed a bond as surety, and delivered it to the principal obligor upon condition that it was not to be delivered to the obligee unless signed in like manner by others. Obligor delivered the bond to obligee without other signatures, and it contained no evidence of the existence of the condition made by A: Held, that A was estopped to deny as against the obligee that it was his deed.

THE opinion of the court was delivered by

STAPLES, J. It must be assumed for all the purposes of this decision that the bond in controversy was a complete and perfect instrument on its face at the time of its delivery to the obligee. The defendants' pleas and the instructions given by the court are obviously based upon this hypothesis. It must also be assumed that at the time the bond was executed by the defendants, other than the principal obligor, it was agreed that it should not be delivered to the obligee until executed by other persons besides the defendants; and further, that without being so executed it was delivered by the principal obligor to the obligee, who was not informed of the condition annexed to the delivery of the instrument.

The question is presented whether the bond under this state of facts is binding upon the parties actually executing it as sureties.

It is very clear that a deed or bond may be committed to a stranger to be delivered by him to the obligee upon the performance of a condition or the happening of an event, and if delivered before the condition is performed or the event happens, the bond will not take effect, although the obligee may not be apprised of the terms imposed, and although there is nothing on the face of the instrument to excite his suspicions or put him upon inquiry. In such case it is simply a question of power in the agent in making the delivery, and not a question of good faith in the obligee in accepting it.

The point to be considered then is, whether there is any substantial distinction between a delivery to a stranger and a delivery to the principal obligor by one who signs the instrument as surety. That such a distinction does exist, and that it is founded upon the soundest principles, I think is easily established.

When the bond is placed in the hands of a third person who is a stranger to the consideration and to the instrument, to be delivered to the obligee only upon the performance of some condition, such person is a mere custodian of the instrument until the condition is performed, having no interest or semblance of an interest in the subject matter of the contract.

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NASH v. FUGATE.

[No. 2.

The obligee finding the paper in the hands of such a person is bound to know how he obtained possession of it, and by what authority he undertakes to dispose of it. It is a case of naked special agency governed by the principles applicable to that class of agencies. All persons dealing with such an agent are bound at their peril to inquire into the extent of his power and to understand its legal effect, and if the agent exceeds the limits of his authority, the act, so far as it affects the principal, is void. When the bond is in the possession of a stranger, there is nothing in the character of the agent, or in the custody of the instrument, calculated to mislead the obligee, in unduly accepting it.

On the contrary, the mere fact that a stranger having no apparent interest in the bond has possession of it is of itself sufficient to excite suspicion, and to put the obligee upon inquiry as to his authority to dispose of it. When, therefore, the obligors deliver the bond to a stranger as an escrow, it cannot be said they have done an act or made a declaration calculated to mislead third persons. The most that can be said is, they have appointed an agent who in making an undue delivery has exceeded his powers, but there is nothing in the manner of the appointment or the circumstances of the agency which prevents the principal from repudiating the act.

On the other hand, very different considerations, it seems to me, should govern where the surety signs a bond complete in all its forms and provisions, and intrusts it to the principal obligor for a proper delivery to the obligee. It is true the principal obligor has no greater power than the stranger to whose custody the bond is committed. But in such case the question is not, what is the power conferred, but what is the power the obligee has the right to suppose is conferred. The principal obligor has certainly an apparent authority to deliver the instrument in its then existing form and condition, that is such an authority as may be fairly inferred from his connection with and possession of the paper. The reasonable presumption is, that he is to dispose of the bond according to the natural course of proceeding in such cases, that is by a delivery to the obligee. It is true the agency is a special one, but the agent being clothed with the indicia of agency for the general purpose of delivery, no secret limitations or restrictions ought to control the exercise of the power so far as parties are concerned dealing with the agent upon the faith of the apparent power.

The instrument being complete in form, precisely such as would have been adopted if the parties signing it alone were to be bound, being found in the possession of the very person who would have held it, if the purpose had been to make an unconditional delivery, under such circumstances an obligee accepting it has the right to infer that the transaction is precisely what it purports to be, and that the real power is in fact coextensive with the apparent power.

In the language of an eminent author: "If the principal has justified the belief of persons dealing with his agent, that the agent had from him sufficient authority to do as agent the precise thing, it is no answer on his part to say that the agent had no authority, or one which did not reach so far, and that it was a mistake on the part of the third party. It may have been his mistake, but the question then is whether the principal led this third party into the mistake." 1 Parsons, 39. If the principal sends his

Vol. I.]

NASH V. FUGATE.

[No. 2.

commodity to a place where it is the ordinary business of the person to whom it is confided to sell, it must be intended that the commodity was sent there for the purpose of sale. If the owner of a horse send it to a repository of sale, can it be implied that he sent it thither for any other purpose than that of sale; or if one send goods to an auction room can it be supposed that he sent them thither merely for safe custody? 2 Kent Com. 621. And so when the surety signs an obligation for the payment of money, and leaves it in the hands of him for whose benefit it was executed, is it to be presumed it was left there merely for safe custody? May it not be fairly inferred it was intended rather for delivery to the obligee? Is the latter to go farther, and take it for granted there are secret limitations upon this power of delivery never communicated to him?

When the surety signs his name to a bond, and confides it to the principal obligor, he thereby makes a solemn declaration that he has become. a party to the instrument, and he so makes and shapes this declaration that it is almost absolutely certain to reach the party who is most likely to be misled by it. It would seem to be a gross violation of justice and good faith to permit the surety under such circumstances to repudiate these solemn declarations by setting up conditions and limitations known only to himself and his co-obligor.

In Pickard v. Sears, 6 A. & E. 469, Lord Denman said: "The rule of law is clear, that when one by his words or conduct wilfully causes another to believe the existence of a certain state of things, and induces him to act on that belief, so as to alter his previous position, the former is concluded from averring against the latter a different state of things existing at the time." And in Lickbarrow v. Mason, 2 Term R. 70, the same doctrine was expressed in a form very familiar to the profession, and that is, whenever one of two innocent persons must suffer by the acts of a third, he who has enabled such third person to occasion the loss must sustain it. The great principle of the law of estoppel is, that when an act is done or a statement made by a party which cannot be contradicted or contravened without fraud on his part and injury to others whose conduct has been influenced by the act or admission, the character of an estoppel will attach to what would otherwise be mere evidence.

In the May No. of the Law Register, 1864 (p. 402), Judge Redfield uses the following language: "Where the surety intrusts the bond to the principal obligor in perfect form with his own name attached as surety, and nothing upon the face of the paper to indicate that others are expected to sign the instrument in order to give it full validity against all the parties, he makes such principal his agent to deliver the same to the obligee, because such is the natural and ordinary course of conducting such transactions; and if the principal under such circumstances gives any assurances to the surety in regard to procuring other co-sureties, or performing any other condition before he delivers the bond, and which he fails to perform, the surety, giving confidence to such assurances, must stand the hazard of their performance, and he cannot implicate the obligee in any responsibility in the matter, unless he is guilty of fraud or rashness in accepting the security." These just and sensible observations are sustained by a number of well considered cases in the American courts: Smith v. Moberly, 10 B. Monroe, 266; Millett v. Parker, 2 Metc. (Ky.) 608; Deardorff et als. v. Foresman,