Ætna Indemnity Co. v. Ladd

135 F. 636, 68 C.C.A. 274, 1905 U.S. App. LEXIS 4354

• Court: Court of Appeals for the Ninth Circuit
• Decided: February 6, 1905
• Docket: No. 1,106
• Status: Published

Opinion

GILBERT, Circuit Judge,

after stating the case as above, delivered the opinion of the court.

It is assigned as, ejror that the trial, court permitted the witness Clemens to testify that the money received from the defendants in error was- paid out for the benefit of the plaintiff in error on contracts for which it had become surety, and which had been assigned to it. It is urged that the contracts had been assigned merely as security- for an advancement of $6,000 by Sudden & Christensen to thé Hardy Shipbuilding Company, and for no other purpose. It is true that the assignment, in its terms, recites that it was made as security for the payment of said sum, of $6,,000. But from and after its date, the evidence shows, it was, in fact treated by both the parties thereto as an absolute assignment for the benefit and protection of the plaintiff in error. Clemens & O’Bryan, the general agents, of the plaintiff in error, had general authority to require any contractor for which it became surety to transfer to, it his plant whenever he became unable to carry on the contract, in order that the surety company might use the same in the prosecution of the contract to. completion. On March 6, 1902, the plaintiff in. error had written to its general agents, as follows:

“When executing bonds of this character, you must always bear in mind that the Surety Company signing such a bond becomes a co-contractor, and in the event the contractor defaults on any part of the work, the company must step in and complete it or else stand the loss.”

On April 25, 1902, it had written its general agents in reference to another bond as follows:

■ “At any time should you perceive indication that the work is not progressing in a satisfactory manner, we shall rely on you to take immediate steps to protect our interests.”

On the same date, in reference to another bond, it had written:

“If, at any time, there should be an indication that the work Is not progressing to the satisfaction of the obligee, kindly take immediate steps to safeguard our interest.”

On June 16, 1902, it had directed its agents to take whatever action may be necessary in the premises “to save us from any ultimate loss.” There were other communications of a similar nature, all tending to show that the plaintiff in error at all times had in contemplation the contingency of assuming the completion of any of the contracts upon which it was surety, whenever it became necessary to do so for its own protection, and that it looked to its general agents to act for it in that capacity. Evidence went to the jury tending to show that the home office was advised of the actions of its general agents in •carrying on and completing the contracts. Thus on May 27th the agents wrote, notifying the company of the advance made by Sudden & Christensen and the assignment of the contracts. They added:

“Until these contracts are finished, all money of the firm is deposited in the name of the Hardy Shipbuilding Company and the BStna Indemnity Company, and all checks are signed by Mr. Hardy, president of the Shipbuilding Company, and countersigned by our Tacoma agent”

On July 7th they wrote:

“We now have the record title to the whole plant, and have practically made arrangements to sell the plant, together with our contracts. * * * In order to get the Kingsford Foundry & Machine Works to release some of the machinery to us, which had been shipped the Hardy Shipbuilding Company, we told them we would pay the freight as we had taken over the contracts and moneys on hand.”

On August 4th they wrote:

“What we meant to say in our last letter was that we would complete this contract to the best of our ability.”

On August 5th they wrote:

“But the thing that troubles us is that we will have to put up some more money in order to carry the work along as everything we buy we seem to have to pay cash for, and of course we have to keep the labor paid up.”

During all this time no answer was made by the plaintiff in error disaffirming any of the acts of its general agents. It is true that on or about August 21st it protested its general agent’s draft of $5,000 to be used on the contracts, but on August 23d it explained its action in so doing by telegraphing to its agents as follows:

“Sufficient money appears to be left to complete Hardy contracts. You must arrange for advances from the owners.”

This answer, so far from repudiating the action of the general agents in assuming the contract, was clearly a ratification thereof, since the only reason assigned for not advancing the money was that it was unnecessary to do so. On August 25th the agents telegraphed to the plaintiff in error as follows:

“Ladds Bank advanced money for material and labor. Owners scared, won’t pay anything. Bank insists immediate payment Must shut down works.”

To this the plaintiff in error replied:

“Prorate payment due among materialmen, authorizing owners to pay them direct.”

On August 26th the plaintiff in error wrote the general agents as follows:

“We will be pleased to have you forward a report showing just what portion of the work has been completed, together with the payments made, also the date of the letter and advice as to whether such payments have been properly applied in settlement of bills for labor and materials.”

Further correspondence followed, but in none of it did the plaintiff in error deny the authority of its agents to assume the completion of the contracts. We find no error, therefore, in the ruling of the court admitting in evidence the testimony so objected to.

It is contended that the court erred in permitting the witness-Clemens to answer the question, “By whom was the boat Georgia completed?” to which he answered, “The boat was completed by Mr. Seeley, trustee for the ¿Etna Indemnity Company, as we believe.” It is urged that, in so answering, the witness stated a legal conclusion, and that the court should have sustained the motion of defendant in error to strike out the answer. The question so propounded did not necessarily call for an answer stating a legal conclusion. The witness had previously testified that Clemens & O’Bryan had been carrying on the work on these contracts, and that “Mr. Seeley, trustee, had been in charge of the plant at Tacoma.” In answering that the work was completed “by Mr. Seeley, trustee for the ¿Etna Indemnity Company, as we believe,” he was but stating his understanding of the capacity in which he and his partners had acted in completing the contract. If it was error to deny the motion to exclude the testimony, it was harmless error,, which could not have prejudiced the plaintiff in error.

Of similar import is the assignment that the court erred in permitting the witness Clemens to testify in answer to the question on whose behalf the additional sum of $3,000 was obtained from the defendants in error, to answer, “¿Etna Indemnity Company.” It was proper for the witness to testify in what capacity he was acting in obtaining this money, for whom he acted when he borrowed it, and his understanding of the relation he bore to the transaction. His statement could not bind the plaintiff in error, nor prejudice its rights.

It is assigned as error that the court admitted in evidence the bond which was executed to the defendants in error at the time when they made their first advance of money to be expended on the contracts. The complaint in the present action contained two counts. In the first it was alléged that the plaintiff in error applied to the defendants in error for moneys wherewith to pay for material and laborers, and that in accordance therewith the money had been advanced to the use and benefit of the plaintiff in error.. In the second count the defendants in error declared upon the bond. At the beginning of the trial, counsel for the plaintiff in error moved that the defendants in error be required to elect on which cause-of action they would stand. The motion was allowed, and the defendants in error elected to stand upon the first. It is urged that thereby they abandoned all cause of action, if any they had, on the bond, and waived all rights thereunder, and that therefore the bond became inadmissible in evidence for any purpose. But it appears that on the cross-examination of the witness Clemens the plaintiff in error drew out the fact that a bond had been given, guarantying the money so loaned, and that in addition thereto the notes of Clemens & O’Bryan had been required by the defendants in error, and that the notes had not been paid. It was upon the redirect examination of the witness that the defendants in error offered the bond to show what the transaction was, since that instrument represented in its recitals that the .¿Etna Indemnity Company was assuming to complete the contracts; that it needed money, and was about to obtain the same from defendants in error. We think it was clearly admissible as showing the nature of the transaction between the parties, and upon what the defendants in error acted. By electing to stand upon the first count of their complaint, the defendants in error cannot be said to have waived all right to use the bond in evidence whenever it became proper or necessary to do so.

It is contended that the court erred in admitting in evidence the transcript of the proceedings in the superior court of the state of Washington, in and for Pierce county, in the suit instituted by the Pacific National Bank to foreclose its mortgage on the plant of the Hardy Shipbuilding Company, in which suit the plaintiff in error, by Remington & Reynolds, appeared to be an intervener. Objection to the transcript was made on the ground that it was incompetent, irrelevant, and immaterial, and because no authority was shown in Remington & Reynolds to act for the plaintiff in error. The transcript was offered in evidence at the close of the deposition of F. S. Blattner, a witness for the plaintiff in error. He had deposed, without objection, that, in the litigation so referred to, “Remington & Reynolds' represented the .¿Etna Indemnity Company.” When the transcript was offered in evidence by defendants in error, the court inquired whether Remington & Reynolds were employed by the company or by the general agents, to which counsel for the defendants in error replied, “It does not say in that deposition.” Counsel for the plaintiff in error contended that it could not be shown that authority was given by any one but Clemens & O’Bryan. The court admitted the transcript in evidence, but stated to counsel for plaintiff in error, “You may show, if you can, afterward, that the parties who acted for the .¿Etna Indemnity Company derived their authority from these same agents.” Counsel for the plaintiff in error complied with this suggestion by introducing the testimony of Mr. Pegram, the secretary of the plaintiff in error, who testified that no one was authorized to appear for the plaintiff in error in that litigation. No motion was made to strike the transcript from the record at any subsequent time. When it was afterward read to the jury, objection was made, not on the ground that the attorneys assuming to represent the plaintiff in error therein had no authority to do so, but on the ground that the transcript itself was incompetent, irrelevant, and immaterial evidence. From the record as it comes to us, we cannot say that the court erred in ruling as it did when the transcript was first offered in evidence, supported as the transcript was at that time by the statement of the witness for the plaintiff in error that Remington & Reynolds appeared in the litigation as its attorneys, nor in subsequently permitting the transcript to be read to the jury, for the evidence so offered was not incompetent, irrelevant, nor immaterial, since it was a judgment record to which the plaintiff in error appeared to be a party, and it tended to show that at the time of that litigation the plaintiff in error assumed to own and to have possession of all of the property and plant of the Hardy Shipbuilding Company. Again, while no direct authority from the plaintiff in error to the attorneys who appeared for it in that suit was shown, it was proven that on July 7th the plaintiff in error was advised of that litigation, and was informed that Clemens & O’Bryan had induced the Pacific National Bank to bring its foreclosure suit, and had, on behalf of the plaintiff in error, filed an attachment suit therein, asking for a receiver, and had, by stipulation at the end of the litigation, obtained “the record title to the whole plant.” It must have known that it was impossible to accomplish all this without representation by an attorney in the litigation. It was advised also by the letter of its agents of August 4th that the latter had incurred heavy expenses, “owing to the necessary lawsuits to obtain possession of the property.” The objection that the transcript was not properly certified, not having been made in the court below, cannot be heard in this court, since the defect was one which might have been remedied if timely objection had been made.

It is contended that the court erred in instructing the jury as follows: “A general agent is defined under the law to be one empowered to transact all his principal’s business.” It is said that by this instruction the jury were informed that Clemens & O’Bryan had all the authority of the president, the secretary, and the board of directors of the plaintiff in error, and that, even if the instruction were correct as applied to a natural person, it could hot apply to a corporation. The instruction so given is sustained by the text of 1 Parsons on Contracts (5th Ed.) 40; Story on Agency, § 17, and by Home Life Ins. Co. v. Pierce, 75 Ill. 435; Cruzan v. Smith et al., 41 Ind. 297; Montgomery Furniture Co. v. Hardaway, 104 Ala. 100, 16 South. 29; Fire Ins. Co. v. Building Association, 43 N. J. Law 652; and numerous other decisions. In 1 Am. & Eng. Enc. of Law (2d Ed.) a general agent is defined to be “one who is authorized to do all acts connected with a particular trade, business or employment.” We are unable to see how the jury could have been misled by the instruction, for they must have understood it to refer only to the kind of business which the plaintiff in error was by its articles authorized to conduct. That busines's in the states of Oregon and Washington was placed in the charge of Clemens & O’Bryan as general agents. The portion of the charge so excepted to must be taken in connection with the remainder of the charge on the samé subject. The court proceeded to say:

“(1) Where a person is by the principal held out to be the general agent of the principal, third persons acting in good faith are justified in relying upon the apparent authority of such agent, notwithstanding secret instructions and restriction in point of fact placed by the principal upon such authority. The principal is bound to third parties for the acts of his general agent within the scope of his apparent authority, even though such acts are not reported by the agent to the principal, for the acts of the agent are the acts of the principal. If you find from the evidence that Clemens & O’Bryan were held out by defendant to be its general agents, plaintiffs had a right to assume that such agents would promptly communicate with their principal all dealings entered into between plaintiffs and such agents assuming to act on behalf of the defendant, if you find that plaintiffs had any dealings with said Clemens & O’Bryan as general agents of the company. (2) I charge you that third parties dealing with an agent are put upon their guard by the very fact, and must do so at their own risk. They cannot rely upon the agent’s assumption of authority, but are to be regarded as dealing with the powers before them, and must, at their peril, observe that the act done by the agent is legally identical with the act authorized by the power. Therefore, if Ladd & Tilton, the plaintiffs, loaned the ninety-five hundred dollars ($9,500) sued for in this action, or any part thereof, to Clemens & O’Bryan, as agents for the defendant, and if you find that Clemens & O’Bryan did not have authority to borrow money for the defendant, then your verdict must be for the defendant, subject to the qualification which the instruction I will presently give you makes of this instruction.”

Error is assigned to all of these instructions except the last, but they are believed to be correct and well sustained by authority. The Distilled Spirits, 11 Wall. 356, 367, 20 L. Ed. 167; Dysart v. Mo., K. & T. Ry. Co., 122 Fed. 228, 58 C. C. A. 592; Anderson v. National Surety Co. (Pa.) 46 Atl. 307; and Knapp v. Express Co., 55 N. H. 348, 353.

The foregoing instruction marked “2” was, with the exception of the qualification at the end thereof, given at the request of the plaintiff in error. It is contended that the court erred in qualifying that instruction by thereafter adding the following:

“It was the duty of Clemens & O’Bryan to protect the interests, so far as they were able, of the defendant company. Whether in the discharge of this duty they were warranted in borrowing the money for the recovery of which this action is brought in order to prevent default on the contract guarantied by the company, and thus save the company from liability, is a question submitted to you. If the agents were warranted, under the circumstances, in borrowing such money, then your verdict should be for the plaintiffs.”

It is said that these instructions are inconsistent, that the latter qualifies the former, and that the qualification itself is contrary to law. When the whole charge is considered in its bearing on these instructions, no error or inconsistency is found in them. In instructing the jury that, if they found that Clemens & O’Bryan did not have authority to borrow money for the defendant, their verdict must be for the defendant, the court had reference to authority, either actual or apparent. It was the duty of Clemens & O’Bryan, as it is of all agents, to protect the interest of their principal. It was for the jury to find whether there was either apparent or actual authority to borrow the money. If they found, under all the facts and circumstances disclosed in the evidence, that, upon the proof of powers which were placed before the defendants in error, it appeared that the general agents were warranted in borrowing the money, the jury were told that it was their duty to return a verdict for the defendants in error. On the other hand, if the jury found that the dealings between the principal and its agents were such as to show that there was express authority to borrow money, the defendants in error were entitled to a verdict, and there was no occasion to consider the question of the apparent authority of the general agents.

It is contended that the trial court erred in denying the motion of the plaintiff in error that the jury be instructed to return a verdict in its favor. In other words, the contention is that there was no evidence before the jury to sustain a verdict for the defendants in error. In determining whether a case shall be taken from the jury, the test question is whether or not the undisputed evidence is so conclusive that the court would be compelled to set aside a verdict rendered in opposition to it. Elliott v. Chicago, Milwaukee, etc., Railway, 150 U. S. 245, 14 Sup. Ct. 85, 37 L. Ed. 1068. The evidence in the case has already, to some extent, been reviewed. In addition to what has been said, it may be observed, briefly, that Clemens & O’Bryan were appointed assistant secretaries of the plaintiff in error, and were made its general agents, and were by the plaintiff in error advertised as such. Before any of the contracts in the present suit were made, the plaintiff in error wrote to Clemens & O’Bryan, “We have written to Stratton that we have given you the general agency for Washington, and you may do as you see fit in regard to having him represent you.” Clemens & O’Bryan were given authority to appoint subagents,- and their appointments were recognized. On January 28, 1902, the plaintiff in error wrote them, “We do not interfere with anything in the territory of our general agents.” The plaintiff in error, as we have seen, authorized the agents to take counterbonds from contractors, and informed them that its course of business was to provide for the contingency of becoming a co-contractor on every contract for which it became surety. It repeatedly advised them in regard to other contracts on which it had become surety through their agency, and directed them to take immediate steps “to protect our interests”; “to take immediate steps to safeguard that interest”; “We shall rely on you to take immediate steps to protect our interest;” “We would suggest that you follow the matter up closely and thereby safeguard our interest;” “Take whatever action may be necessary in the premises to save us from any ultimate loss.” In the view which we take of the evidence bearing upon the motion for an instructed verdict, it becomes unnecessary to consider the question whether the general agency so created carried with it by implication the power to borrow money. There was evidence before the jury tending to show that the plaintiff in error, in its dealing with the general agents, recognized their power to borrow money, and acquiesced in their action in so doing. At the time when the plant of the Hardy Shipbuilding Company was seized under a chattel mortgage, and the general agents by legal proceedings obtained the possession thereof, the plaintiff in error.was informed of the main facts in that matter, and was advised that such possession had been taken, and that its general agents had incurred heavy expense in the litigation, and were proceeding to complete the contracts. It did not disaffirm or disapprove the action of its general agents in so doing. It is true that the secretary of the plaintiff in error testified that the general agents had no power to borrow money for the company under any circumstances, and that no such authority had arisen by virtue of any custom of such agents to borrow money. It may be assumed to be tru'e, as this testimony shows, that no express authority was ever given the agents to borrow money on behalf of their principal. But it is also true that they were never forbidden to borrow money, and that the plaintiff in error, through all its dealing with them, contemplated the contingency of its becoming a co-contractor on any or all of the contracts upon which it became surety, and that it looked to them to safeguard its interests in such a contingency. It is not to be supposed that in undertaking such contracts the plaintiff in error, distant as it was from the scene of the operations, contemplated giving its personal attention to the contracts. The whole course of its correspondence and actions shows tha'; it expected its general agents to act for it in every case where it might become a co-contractor. The completion of such contract; which were in default involved, or might fairly be expected to involve, the advancement and expenditure of money. In the case of the contracts under consideration in the present case, it did involve the advancement of money. All through the correspondence the plaintiff in error was notified that its agents were advancing money and incurring expense. It must have known that the money was advanced upon its own responsibility, and not upon that of its agents. When its agents drew directly upon it for funds to carry out the contracts, it did not deny its liability for such funds, nor did it deny the authority of its agents to draw upon it. It refused to make the advance solely upon the ground that sufficient money appeared to be left to finish the Hardy contracts, and that arrangement ought to be made for advances from the owners. Two days after so telegraphing, it directed its agents to “prorate payment due among materialmen authorizing owners to pay them direct.” After the plaintiff in error had been notified by a dispatch sent August 25th that the defendants in error had advanced money for material and labor, and that they insisted upon immediate payment, it wrote to its agents: “We will be pleased to have you forward a report showing just what portion of the work has been completed, together with the payments made,” and still later it wrote them that, “in the meantime, it can do no harm to suspend work on the contracts for a week.” Under all the evidence so adduced, we find no error in the ruling of the trial court in denying the motion of the plaintiff in error for an instructed verdict.

The judgment is affirmed.