229 F. 326 | 4th Cir. | 1915
This action was on two surety bonds gien to the Globe & Rutgers Fire Insurance Company by the Citizens’ Guaranty Company, in behalf of a corporate agency of the insurance company, first called General Southern Agency, and retaining its identity through several changes of name. The first bond for $10,000, covering the period from June 7, 1906, to June 7, 1907, was extended to June 7, 1908; the second, for $5,000, covered the period from July 15, 1908, to July 15, 1909. The District Judge 'instructed a verdict for $5,000 and interest, aggregating $6,400, for defaults secured by
“We beg to say again that we cannot consider this claim until a settlement is reached: with Fowler & Co., or (if settlement cannot be had) until your claim is established by process of law. Then, if we are liable, we will pay; otherwise we cannot do so. * * * Fowler & Co. dispute your claim. * * * We • understand that Fowler, & Co. are ready to pay any balance which they may owe you, whenever the same may be ascertained by a proper settlement or by a court of competent jurisdiction. * * * It appears that they have asked you for a settlement of the contingent commission account, which has not been fulmished. It seems to us that Fowler & Co. are entitled tu a detailed statement of the account; and if it were furnished it would cer.tainly* put an end to excuses for delay on that ground. We suggest that you*329 render a detailed statement setting forth fully your contention (just as if you would have to do if you were proving your claim in court), and we fully believe that you would have no trouble in reaching a settlement with them. We are sending a copy of this letter to Fowler & Co.”
But this letter could not avail to recall the waiver on which the insurance company had acted in trying to comply with the surety company's demand that it come to an agreement with the agent as to the amount due.
“Fourteenth. None of the conditions: or provisions contained in this bond shall lie deemed to have been waived by or on behalf of the company, unless the waiver be clearly expressed in writing over the signature of its president or vice president, and its seal be thereto affixed, duly attested.”
There can be no doubt that the same authority that issues a bond may waive any of its conditions. The provision quoted is valid in denying to any agent of the company the power to waive any of the conditions or provisions of the policy, unless the waiver should he under the signature of the president or vice president, and under the seal of the company. But it cannot mean that the company itself cannot waive or otherwise contract with reference to the insurance in any way it should see lit. The letters which expressed the intention to waive the requirement as to notice were sent from the general office of the company, and they were signed by the secretary, presumably under the authority of the company. Hence the waiver was by the company itself. Insurance v. Norton, supra.
Still we think the evidence did not make a serious issue of fact as to whether the agent had been guilty of fraud or dishonesty. The general rule is that an agent is guilty of fraud or dishonesty when he collects money belonging to his principal and uses it for his own purposes, or refuses .to turn it over. But if there be mutual demands, and the failure to settle be due to an honest conviction of the agent that he has good offsets against the balance appearing against him, he cannot be said to be acting fraudulently or dishonestly in the mere withholding of the balance to the extent of the amount claimed by him until the true amount due by him be ascertained. Nevertheless, under such circumstances, the agent is bound in honesty' not to use the money
“The plea does not set forth any of the circumstances attending the execution and delivery of the bond. It does not aver that there was any misrepresentation, anything fraudulently kept back, or any opportunity to make disclosures on the part of the company, or any inquiry by the sureties, before the bond was delivered. Nor is it averred that the company was aware that the sureties were ignorant of the facts complained of. It is, perhaps, to be inferred from the plea that the fact was — as the record, aside from the plea, shows it to have been — that the bond was executed at Mobile, and sent by Voorhees by mail to the company in New York. If this were so, the company, upon receiving it, was under no obligation to make any communication to the sureties. The validity of the bond could not depend upon: their doing so. The company had a right to presume that the sureties knew all they desired to know, and were content to give the instrument without further information from any source. Under these circumstances, it was too late, after the breach occurred, to set up this defense.”
The objection to the introduction of a number of letters seems to have no foundation. They were letters between the parties or their counsel, and between the insurance company and the agent. All of them bear on the question whether there was a fraudulent or dishonest default by the agent.
The questions propounded to Fowler, representative of the agency, called for his interpretation of written contracts, and were properly excluded.
The point of chief difficulty is the method of ascertainment of the amount of the liability. The first bond was effective from June 7, 1906, to June '7, 1908; the second was effective for one year from its date July 15, 1908. Thus it appears that there was an unbonded period from June 7, 1908, to July 15, 1908. The second bond contained these provisions:
“First. The company shall not be liable hereunder for any sum or amount whatever, which the employé may, at the commencement of the term herein-before provided for, owe the employer.”
“Third. The company, upon the execution of this bond, shall not thereafter be liable to the employer under any previous bond executed in behalf of the employé, and upon the execution of the company of any new bond to the employer in behalf of the employé, all the obligations of this bond shall immediately cease and determine; it being mutually understood that it is the intention of this provision that but one (the last) bond shall be in force at one time: Provided however, that the employer shall have the right, within six months after the termination of any previous bond, to make claim for, and proof of, any loss occurring thereunder; but if any claim be so made under any previous bond during the said period of six months, and if loss also occur under this bond, the aggregate liability of the company for all losses under all bonds shall not exceed the sum of-dollars.”
Although the limitation is left blank, there seems to be no dispute that the intention was ,to limit the total liability under the two bonds to the amount of the second bond, $5,000. The result is that the surety company is not liable for any default occurring between June 7, 1908, and July 15, 1908; but it is liable for the aggregate defaults, not only of the period covered by the second bond, but also of the period covered by the first subject to the limitation that the entire liability shall not exceed $5,000.
The monthly balances against the agency were not due until the expiration of 60 days after the monthly reports. Hence there was no default until the expiration of 60 days after each report. But the agency was liable to the insurance company as soon as money was collected by it for the credit of the insurance company; and the undertaking of the surety company immediately attached to credits to the insurance company in the hands of the agency. The surety company was bound to see that these collections were honestly accounted for. It follows that under the first bond the surety company was liable for all amounts reported by the agency to be in its hands up to June 7»
While the surety company is not liable for any amounts collected for the unbonded period from June 7, 1908, to July 15, 1908, this exemption does not extend to amounts which had been previously collected, and reported during this unbonded period. On July 15, 1908, when the second bond was given, the surety company was chargeable with the balance unpaid under the old bond ascertained as above indicated. The liability under the terms of the new bond commences with this balance. To it is to be added all collections made from July 15, 1908, to the close of the agency’s transactions, including the balances which fell due under the 60-day rule after the termination of the agency, less payments made by the agency and amounts collected from subagents. The amounts collected from subagents cannot be credited on moneys collected and accounted for during the unbonded period, because the presumption, in the absence of proof to the contrary, is that the subagents remitted the balances in their hands as they fell due, and that the collections from them after the termination of the agency were for the later months "covered by the last bond.
Under this method of the application of the credits the account will stand thus:
Total balance of the entire period, including unbonded period____$10,251 24
Less collections in unbonded period............................... '3,742 89
Total balance accruing during bonded period...................... $ 6,508 35
Less credit under contract............................' $2,500 00
Less collections from subagents....................... 1,497 79 3,997 79
Net balance.................................................... $ 2,510 56
Interest from May 6, 1909, date of proofs of loss, to January 13, 1914, first day of the term of District Court at 6 per cent, per annum, on $2,510.56 .......................................... 705 69
Total amount due on bonds...................................... $ 3,216 25
The result is that the judgment of the District Court must be reversed, and a new trial ordered, unless the plaintiff shall within 60 days' after this judgment remit from his recovery $3,183.75 the difference between his judgment, $6,400, and the amount above stated. The main points of doubt are whether the above credit of $2,500 should be reduced to $1,900, as found by the commissioner, and whether $3,742.89 is the true amount collected and unpaid by the agency for the unbonded period. It is possible, too, that the plaintiff may be able to show affirmatively that the amounts collected from subagents, $1,497.-79; were on account of unpaid balance of the unbonded period. If so, that sum should be taken from the total balance of the unbonded period, claimed to be $3,742.89, before such balance of the unbonded period, is subtracted from the total balance of $10,251.24. Upon these points we are not to be understood as expressing any opinion. The credits are given for the'full amounts claimed by the defendant merely by way of illustration, and to end the. litigation, in case the plaintiff