Home/Court of Appeals of Texas/Southern Surety Co. v. First State Bank of Montgomery

Southern Surety Co. v. First State Bank of Montgomery

167 S.W. 833, 1914 Tex. App. LEXIS 777
CourtCourt of Appeals of Texas
DecidedMay 27, 1914
DocketNo. 5295.
StatusPublished
Cited by1 cases

This text of 167 S.W. 833 (Southern Surety Co. v. First State Bank of Montgomery) is published on Counsel Stack Legal Research, covering Court of Appeals of Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Southern Surety Co. v. First State Bank of Montgomery, 167 S.W. 833, 1914 Tex. App. LEXIS 777 (Tex. Ct. App. 1914).

Opinion

CARL, J.

The First State Bank of Montgomery sued the Southern Surety Company, an Oklahoma surety corporation doing business in Texas under a permit, and alleged, substantially: That on August 3, 1908, the defendant executed a fidelity bond to the bank wherein and whereby it undertook to make good and reimburse to the bank any pecuniary loss which the' bank might sustain during the period of one year, beginning July 31, 1908, and ending July 31, 1909, by any act of N. O. Lauve, as cashier of the bank, not to exceed $5,000, the amount of the bond; that during the life of the bond .N. O. Lauve converted and misapplied $5,489 of the funds of the bank; and that the bank did not discover the defalcation until on or about February 15, 1910, and that immediately upon said discovery the bank notified the surety company of the loss and demanded payment in the sum of $5,000.

The surety company alleged that the bond was based upon warranties therein contained which constituted conditions precedent to the accrual of any obligation thereon against the company, and pleaded specially this clause in the bond:

“Whereas, the employer has heretofore delivered to the company certain representations and promises relative to the duties and accounts of the employé and other matters, it is hereby understood and agreed that those representations and such promises and any subsequent representation or promise of the employer herein required by or lodged with the company are hereby expressly warranted to be true.”

•It is- claimed that- the contract was breached by the bank, in that question No. 5 was incorrectly answered. That question was:

“Q. To whom and how frequently will he account for his handling of funds and securities?”

And the answer was:

“A. Once a month to board of directors, and to commissioner of banking of the state of Texas, whenever called upon as required by law.”

It is alleged that Lauve did not so account to the board of directors during the period covered by the bond. Question 6 was:

“What means will you use to ascertain whether his accounts are correct? How frequently will they be examined? By whom will they be examined?”

And the answers were:

“Monthly reports and state examinations; not less than six times a year; committee of directors — state examination.”

It is claimed that these requirements were not met, and that they were warranties with which the bank was bound to comply. Questions 7 and 8 and the answers given to samo were:

“(7) When were his accounts last examined? June 30, 1908. (8) Were they reported correct? Yes.”

It is claimed that the answers to these questions were not true, and that no examination was made on June 30, 1908, and reported correct, and that by reason of such false answer's these warranties were breached.

In a trial amendment the surety company alleged that, in answer to questions 9 and 10 made by the bank, it was stated that Lauve was not indebted to the bank, when in fact he'Owed the bank $400, and that said false statements were material to the risk assumed, and, by making such false answers, the bank breached its agreement and warranty and thereby rendered the bond void.

The bank denied these allegations, and alleged that if Lauve was short with the bank at the time the answers were made, or owed it, the bank did not know it, and that all of the answers were made in good faith; that the answers made were true, but, if not, they did not increase 'the risk; but, if 'not true, then defendant cannot insist upon same as a bar of the right of action, because it did not accompany the bond with a written or photographic copy of the application made for the bond and a copy of all questions asked and answers given thereto, as required by statute.

The trial was before the court, without a jury, and judgment was rendered for $6,025, same being principal of $5,000, and interest to that date, and for costs, in favor of the bank.

There is one assignment of error briefed which is to the effect that the court erred in rendering judgment for the plaintiff, for the reason, it is claimed, the defaulting cashier’s accounts were not examined by the directors of the bank as they should have been under the alleged warranties shown by the answers *834 to the questions propounded in securing the bond sued upon; that such examinations as were made were not such as were contemplated by the alleged warranties, and were not reasonably'calculated to disclose the defalcations of the cashier; and that no verification of the amounts with depositories was made.

The trial court filed conclusions of fact. We will not here set out the substance of the same, except that which bears upon this assignment of error. Some of the questions asked and answered by L. A. Peel, vice president of the bank, in the application for the bond for N. O. Lauve, are as follows:

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Related

Commercial Union Assur. Co. v. Preston
238 S.W. 326 (Court of Appeals of Texas, 1922)

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Bluebook (online)
167 S.W. 833, 1914 Tex. App. LEXIS 777, Counsel Stack Legal Research, https://law.counselstack.com/opinion/southern-surety-co-v-first-state-bank-of-montgomery-texapp-1914.