Summary
In National Union Fire Ins. Co. v. Currie, 180 Miss. 711, 178 So. 104 (1938), it was said the liability of a surety is governed by the express terms and the extent of his undertaking.
Summary of this case from Gardner Hdwe. Co. v. St. Paul Ins. Co.Opinion
No. 32955.
January 17, 1938.
1. INSURANCE.
A surety on an insurance agent's fidelity bond, who has reimbursed the insurance company upon demand for delinquencies of the agent in an amount in excess of the bond's penalty, is no longer liable on the bond for other delinquencies occurring during a continuance of the agency, even in absence of any agreement for release.
2. PRINCIPAL AND SURETY.
The liability of a surety is governed by the express terms and extent of his undertaking.
3. PRINCIPAL AND SURETY.
Sureties are persons favored by the law, as their obligations are ordinarily assumed without pecuniary remuneration, and their obligations are not to be extended by implication or construction.
4. PRINCIPAL AND SURETY.
Sureties have a right to stand on the terms of their obligation, and, having consented to be bound to a certain extent only, their liability must be found within the terms of that consent, strictly construed.
5. PRINCIPAL AND SURETY.
Where a surety has made partial payments to make good alleged defaults of the principal, application of the payments is made by deducting them from the penalty of the bond and allowing interest on the balance thus resulting from the commencement of the suit; there having been no previous demand for the penalty or acknowledgment of the whole when due.
6. INSURANCE.
A survey of an insurance agent's fidelity bond, who paid amount in excess of the penalty in advance of suit to make good alleged defaults of the agent, thereby discharged his full obligation, and avoided being subjected to liability for the attorney's fees provided for in the bond.
APPEAL from the circuit court of Forrest county. HON.W.J. PACK, Judge.
Luther A. Smith, of Hattiesburg, for appellant.
It would seem to be quite clear that the testimony with reference to the alleged payments prior to the accrual of the amounts for which this suit was filed was utterly immaterial and beside the issue raised by Mr. Currie in his Special Plea, to-wit: that the check of August 1, 1936, was given and accepted in full discharge of his obligation on the surety contract. This contract was the joint undertaking of Mr. Holcomb and Mr. Currie. They were equally liable thereon. If Mr. Holcomb was liable for the amount sued for, then Mr. Currie was liable for it.
21 R.C.L. 974-975; 50 C.J. 74; Bishop v. Currie, 133 Miss. 517, 97 So. 886; McCannon Co. v. Richardson, 117 Miss. 345, 78 So. 292.
The surety contract or bond sued on in this case is a continuing obligation and had no definite time limit. It states on its face that the insurance company was about to appoint Holcomb as its agent to issue and deliver his policies on its behalf and to collect monies due it, and the company required the execution of this surety bond to guarantee that its said agent would faithfully account to it from time to time for the said monies collected. This was necessary in order that the said agent might continue to do business and operate his insurance agency.
It is plain that if any payments had been made prior to the accrual of the amount sued for, they were made in order that the agency might continue; in other words, in order to prevent the appellant company from cancelling the agency.
Upon the failure and refusal of Mr. Holcomb and Mr. Currie to pay the amounts for which this suit was brought, the agency contract was cancelled and Mr. Holcomb's authority to do business was terminated by the company. Thereupon, the obligation of Mr. Holcomb and Mr. Currie under the bond became absolute to pay the amount of the delinquent accounts up to the principal named in the bond, to-wit, $1000.
The only issue raised by the pleadings was whether or not the appellant released Mr. Currie upon payment of the $566.12, and the testimony on this question was in direct conflict. Furthermore, if this money was not Mr. Currie's, then there would have been no consideration for the release, even if one had been made.
Manifestly, therefore, the lower court erred in granting the peremptory instruction in favor of the appellee and the cause should be reversed and remanded.
This is a suit upon a written bond of suretyship, duly signed and acknowledged by the parties against whom the suit was filed. In such case it is considered by all the authorities to be sufficient merely to allege and prove the bond or contract and to allege and prove the balance due for which suit is brought.
Chicago Portrait Co. v. Maddox, 112 Miss. 434, 73 So. 278.
George W. Currie, of Hattiesburg, for appellee, Alexander Currie.
We submit that the court's action in granting Alexander Currie a directed verdict was the only course open to the Circuit Judge.
There was no burden on Holcomb to testify nor on Alexander Currie to know whether the account was true or false; but there was a burden throughout the trial upon the plaintiff to prove its case by a preponderance of the competent testimony. We submit that the plaintiff failed to meet this burden, and that no judgment should have been rendered against the principal or the surety.
Dicus v. Republic Paint Varnish Works, 128 Miss. 189, 90 So. 729.
This account is not sworn to as being of the personal knowledge of affiant, but is an affidavit on information and belief.
Section 1978, Code of 1906 (Section 1638, Hemingway's Code).
The alleged accounts and the bill of particulars were not sworn to upon the personal knowledge of any person. The alleged accounts current which the witness was allowed to introduce were not exhibited with the declaration or the bill of particulars.
Section 526, Code of 1930.
Alexander Currie testified, and it is not denied, that he paid a total of $1660 on this $1000 bond. We submit that the bond was entirely discharged, whether there was any release or not when the final payment was made.
The appellant could have established the liability of the defendant and appellee in but one way. It was not sufficient to charge and prove merely the execution of the contract of guaranty. The contract sued upon had neither the form nor the substance of a promissory note. The appellant could not introduce the contract, and thereby make out a prima facie case and rest, and shift the burden to the cross appellant. It had to go further — much further — and establish with certainty and definiteness an account and indebtedness with the appellant, and default in the payment thereof. The appellant did not file nor introduce nor undertake to introduce a sworn, itemized statement of its account and claim against the cross-appellant. It did not take the deposition of nor offer as a witness its treasurer, bookkeeper, or anyone else even claiming to have a personal knowledge of the correctness of its alleged claim against the cross-appellant. It offered no competent evidence, and no sufficient evidence of any kind, upon which the jury could base a verdict against the defendant.
Wolff v. Hopkins, 111 So. 290; Section 734, Code of 1906; Section 517, Hemingway's Code; Pipes v. Norton, 47 Miss. 61; Southern School Book Depository v. Donald, 115 Miss. 465, 76 So. 519; Levy v. Bank, 124 Miss. 325, 86 So. 807; Finck Co. v. Brewer, 133 Miss. 9, 96 So. 402.
E.J. Currie, of Hattiesburg, for R.M. Holcomb, cross-appellant.
It is respectfully submitted that the trial court erred in permitting Louis J. Rareshide, over the objection of the cross-appellant, to testify in regard to the alleged accounts current which formed the basis of the plaintiff's case. This witness was not the president, nor the treasurer, nor the bookkeeper.
This witness never did undertake to state what his duties were, and so far as the record shows, he did not even pretend to know whether the accounts current, about which he was testifying, over the objection of the cross-appellant, were correct or not.
Dicus v. Republic Paint Varnish Works, 128 Miss. 189, 90 So. 729.
A very careful examination of the testimony of the witness Rareshide fails to disclose that he even claimed any personal knowledge of the correctness of the alleged accounts current, about which he was permitted to testify at length, over the repeated objections of the cross-appellant.
It is respectfully submitted that the testimony of this witness in regard to the alleged accounts current was improperly admitted.
Section 526, Code of 1930.
These alleged accounts current were inadmissible for the further reason that, even though they had been exhibited with the declaration, they were not sufficiently itemized.
Section 555, Code of 1930.
The contract sued upon had neither the form nor the substance of a promissory note. The appellant could not introduce the contract, and thereby make out a prima facie case and rest, and shift the burden to the cross-appellant. It had to go further — much further — and establish with certainty and definiteness an account and indebtedness with the appellant, and default in the payment thereof.
Wolff v. Hopkins, 111 So. 290; Section 734, Code of 1906; Section 517, Hemingway's Code; Pipes v. Norton, 47 Miss. 61; Southern School Book Depository v. Donald, 115 Miss. 465, 76 So. 519; Levy v. Bank, 124 Miss. 325, 86 So. 807; Finck Co. v. Brewer, 133 Miss. 9, 96 So. 402.
This appeal is from the action of the circuit court of Forrest county in granting a peremptory instruction in favor of the appellee, Alexander Currie, who was sued jointly with R.M. Holcomb, local agent of appellant fire insurance company, as surety on the fidelity bond of such agent. The declaration alleged an indebtedness of the agent in the sum of $1,111.20, but sought to recover of the defendants, in the court below, only the amount of the penalty of the bond, plus a reasonable attorney's fee provided for therein.
The bond on which the suit is brought was executed on the 15th day of July, 1930, in the sum of $1,000, and is conditioned for the faithful and punctual accounting and paying over to the obligee therein of all moneys collected or received by the agent for premiums on policies of insurance, renewals, return commissions, advance commissions charged back on account of policy cancellations, etc.; and also for the prompt and faithful surrender of all moneys in default, books of record, supplies, and other property belonging to the obligee at the termination of such agency. The agency was not finally terminated until November 2, 1936.
According to the undisputed testimony, demand was first made upon the appellee surety in October, 1935, to make good an alleged delinquency of the agent, whereupon appellee paid to the appellant the sum of $425.94; again, on January 20, 1936, he paid the sum of $262.47 on a further alleged delinquency; and on March 30, 1936, he paid the sum of $405.47 for the same purpose; the total amount of said payments being in excess of the penalty of the bond, and all made by appellee on such surety pursuant to demands on him by appellant. The indebtedness of $1,111.20 is alleged to have accrued during the months of May to September, 1936, inclusive.
It is also shown that on August 1, 1936, the sum of $566.12 was paid in settlement of an indebtedness accruing in April of that year, and appellee testified that this amount was paid by him under an oral agreement and understanding had with the general state agent of the appellant to the effect that appellee was thereupon fully discharged and released from further liability as surety on the bond sued on. However, there is a conflict in the evidence as to whether the sum last mentioned was the money of the agent or surety; also, as to whether there was any agreement had for the discharge and release of the surety in consideration thereof. But since the payments which are shown to have been theretofore made by the surety himself, in compliance with the demands of the appellant, were in an amount in excess of the penalty of the bond, the obligation of the bond was thereby discharged, so far as the surety was concerned, and no agreement for his release was necessary. The contractual relation between the appellee and appellant was not one of unlimited suretyship. It was unlimited as to duration, but it constituted a continuing guaranty or security, limited as to amount, to wit, the sum of $1,000; and when the surety made good the alleged delinquency of the agent to the full extent of this limited liability, he could not further be held responsible on the bond for other delinquencies occurring during a continuance of the agency. The liability of a surety is governed by the express terms and extent of his undertaking. Sureties are persons favored by the law. Their obligations are ordinarily assumed without pecuniary remuneration, and are not to be extended by implication or construction. Lipscomb v. Postell, 38 Miss. 476, 77 Am. Dec. 651; Cahn v. Wright, 119 Miss. 107, 80 So. 494; W.T. Raleigh Co. v. Rotenberry et al., 174 Miss. 319, 164 So. 5; Wingo-Ellett Crump Shoe Co. v. Naaman, 175 Miss. 468, 167 So. 634; Leggett v. Humphreys, 62 U.S. 66, 21 How. 66, 16 L.Ed. 50; 21 R.C.L. 875; 50 C.J. 78, 79. Their liability is, as stated by the text-writers, and under the decisions, strictissimi juris. They have a right to stand on the terms of their obligation, and, having consented to be bound to a certain extent only, their liability must be found within the terms of that consent, strictly construed. It has been held that where partial payments have been made by a surety, the application of the payments is made by deducting them from the penalty of the bond, and allowing interest on the balance thus resulting, from the commencement of the suit; there having been no previous demand of the penalty or acknowledgment that the whole was due. 21 R.C.L. 1086; McGill v. Bank of U.S., 12 Wheat, 511, 6 L.Ed. 711. If the surety in this case had failed to comply with the demands of the appellant by paying the several sums which were shown to have been paid by him prior to making the payment of $566.12 in question, and if this suit had been brought to recover these amounts, in addition to the $1,111.20 alleged to be due by the agent at the time of bringing the suit, it could not be contended that a judgment should be rendered against the surety for more than the full penalty of the bond, plus an attorney's fee. By paying amounts in excess of the penalty of the bond in advance of the suit to make good the alleged defaults of the agent, the surety thereby discharged his full obligation, and avoided being subjected to liability for the attorney's fee provided for in the bond.
Our conclusion on the question of the appellee's nonliability for any part of the indebtedness sued for renders it unnecessary for us to consider other questions involved.
Affirmed