United American Fire Insurance Co. v. American Bonding Co. of Baltimore

131 N.W. 994, 146 Wis. 573, 1911 Wisc. LEXIS 172

Opinions

The following opinion was filed June 1, 1911:

ÜAmras, J.

The bond sued on obligated the surety to-“make good to the employer, within sixty days, any loss sustained by the employer by larceny or embezzlement committed by the employee during a term” of one year from February 1,. 1908. The appellant contends that no competent proof was offered to show that the agent, Greene, had collected or at any time had in his hands any money belonging to- the plaintiff which had not been paid to it, and that the court erred in directing a verdict for the plaintiff and in refusing to direct one for the defendant. The plaintiff insists that the required proof was presented.

The agent of the plaintiff admitted to its secretary on December 22, 1908, that he had collected and used $2,800 of money belonging to the plaintiff. The total amount due or to become due the plaintiff for collected and uncollected premiums at this time, according to statements rendered by the agent, was $3,604.80. Of this amount $700 was paid after December 22d. A statement of account was compiled by the plaintiff from the daily reports and monthly accounts rendered by the agent, which was submitted to the latter on May 17, 1910, and showed a balance of $2,904.80. This statement is Exhibit 29 of the record. The agent then admitted the correctness of the account, and that he had collected and retained the entire balance shown by the account. It is suggested that this evidence was modified by the witness on cross-examination, but such is not the fact. If this testimony was competent, a prima facie case of embezzlement was made by plaintiff, as the evidence showed the volume of business done by the agent, the amount of his principal’s money which he received and converted to his own use, and repeated demands that he pay the money over.

It is conceded by both parties.that any admission by the agent of the amount of money in his.hands belonging to his principal, made prior to his resignation, would be competent evidence against the surety. Goldman v. Fidelity & D. Co. 125 Wis. 390, 396, 104 N. W. 80, and cases cited. It is contended by the defendant, however, that such admissions were made after the agency was terminated and were therefore incompetent. There are many eases holding generally that declarations or admissions made by an agent when his employment has ceased are not competent in an action by the principal against the surety. Lee v. Brown, 21 Kan. 458; Knott v. Peterson, 125 Iowa, 404, 407, 101 N. W. 173; Wieder v. Union S. & G. Co. 42 Misc. 499, 86 N. Y. Supp. 105; Chelmsford Co. v. Demarest; 7 Gray (73 Mass.) 1, 7; Lewis v. Lee Co. 73 Ala. 148; Trousdale v. Philips, 2 Swan (Tenn.) 384; Bocard v. State ex rel. Stevens, 79 Ind. 270; Shelby v. Governor, 2 Blackf. 289; Dobbs v. Justices, 17 Ga. 624, 630; Wheeler v. State, 9 Heisk. 393, 397; Union Sav. Asso. v. Edwards, 47 Mo. 445; Ayer v. Getty, 46 Hun, 287; Eichhold v. Tiffany, 20 Misc. 680, 46 N. Y. Supp. 534; Blair v. Perpetual Ins. Co. 10 Mo. 559; Hodnet’s Adm'x v. Pace’s Adm’r, 84 Va. 873, 6 S. E. 217; Hatch v. Elkins, 65 N. Y. 489; Stetson v. City Bank, 2 Ohio St. 167. The cases in this court bearing on the question ar.e Stone v. Northwestern S. Co. 70 Wis. 585, 587, 36 N. W. 248; Coxe Bros. & Co. v. Mil brath, 110 Wis. 499, 505, 86 N. W. 174; Kamp v. Coxe Bros. & Co. 122 Wis. 206, 212, 99 N. W. 366; New Home S. M. Co. v. Simon, 113 Wis. 267, 89 N. W. 144. Rone of these cases present the saíne facts as does the case before ns.

It was the duty of the agent under the written contract to remit for the business written in October not later than December 31st, and for that written in Rovember not later than the 31st of January following. The time for making remittances for business written under the oral contract does not ajipear. The agent tendered his resignation about December 1st, and after that time wrote no new business. It was still the duty of the agent after his resignation to make remittances during the months of December and January, according to the terms of his' contract, and to collect any outstanding premiums that were unpaid and to account for and remit such premiums to the plaintiff, less his commission and expenses. This much satisfactorily appears from the whole record. . Even if the record were silent, the duty of an agent to account for moneys coming into his hands is well settled. See collection of cases found in 31 Oye. 1470, note 90, and 2 Am. & Eng. Ency. of Law & Pr. (2d ed.) 1070 and 1057. Even after his resignation it was contemplated that Greene would continue to perform his former duties of collecting premiums due to the company and of remitting the same to it. The agent did not make up Exhibit 29, but it was compiled from statements which he had rendered, and the only thing in reference thereto which it was necessary for the plaintiff to be advised upon was whether or not the business reported as having been written had been paid for by the policy-holders to the agent. When he stated that all of the moneys had been collected he was not making a mere casual remark, but was discharging a duty that devolved upon him under his old contract.

The question we have before us, therefore, is, Where an aeent renders an account or O E?s an account submitted to Mm after his employment has ceased, hut which it is his-duty under his contract to render or to O K, as the ease may be, is that act a part of the res gestee and admissible in evidence as such in an action against the surety? There is no question but that if the statement had been' O K’d while he was still actively engaged as agent for the plaintiff it would be receivable in evidence against the surety. Should that rule be extended beyond the term of employment? The case to which our attention has been called that bears most directly on the subject is Father Matthew Y. M. T. A. & B. Soc. v. Fitzwilliam, 12 Mo. App. 445, 449, which was affirmed in 84 Mo. 406. There the treasurer of the society had been removed for dishonesty. After his removal he made a statement showing the amount of his defalcation, which was admitted in evidence in an action against the surety. The latter claimed that the ■evidence was incompetent, but the court held that it was the duty of the treasurer to make up a statement of his account, and, such being the case, what he did in this regard was as much a part of the res gestee as if the work had been done before he had ceased to be treasurer. Some significance is given to the fact that the statement was made during the term of office for which the defaulting treasurer had been elected, but we fail to see how this fact can have very much weight in determining whether the evidence was admissible or not. He was not the treasurer when the statement was made. It has also been held that where it is the duty of a public officer to render an account of the moneys in his hands as such officer, but he fails to do so before the expiration of his term, a performance of such duty thereafter renders the admissions made ■competent evidence against the surety. Townsend v. Everett, 4 Ala. 607, approved in Lewis v. Lee Co. 73 Ala. 148; Jenness v. Blackhawk, 2 Colo. 578; Wyche v. Myrick, 14 Ga. 584. These cases are quite analogous in principle to the one before us. Other authorities holding that the true test of admissibility is whether the admission is made in the course of official duty are 1 Greenleaf, Ev. (16th. ed.) § 187; Douglass v. Howland, 24 Wend. 35, 59. See, also, 2 Wigmore, Ev. § ion.

We perceive no very good reason why, where an agent does, an act which, it is his duty under his contract to perform, evidence of that act after his principal duty as agent has ceased should not he admissible as well as if made during the time he was actively performing his duties, and we think it would be the better rule to hold such testimony competent. We conclude, therefore, that a prima facie case of embezzlement .was. made, there being no evidence offered by the defendant upon the question.

In the application of the plaintiff for a surety bond it was. stated (1) that the agent would remit on the 10th of each month; (2) that he would not be permitted to retain balances; (3) that his accounts and books would be inspected, audited, and verified at least once a month; and (4) that his outstanding accounts would be verified at least once a month. It was further stated that it was agreed that the answers of the applicant should be warranties and form part of and be conditions precedent to the issuance, continuance, or renewal of the bond. The bond itself contained a statement that all “the representations made by the employer ... to the surety are warranted to be true.” This probably refers to the representations contained in the application for the bond.

The appellant claims that it was incumbent on the plaintiff to prove the truth of the representations made as a condition precedent to the right of recovery. The respondent contends that the representations were mere warranties or conditions subsequent which should be pleaded and proven as a defense.

The question whether the representations were conditions precedent or warranties is not very material, however, inasmuch as these conditions and the breach thereof were pleaded as a defense, and the proof showed that the agent did not remit on the 10th of each month; that he was permitted to re tain balances, and that bis books and accounts were not audited monthly, and that bis outstanding accounts were not verified monthly. It is true that tbe plaintiff denied knowledge of tbe fact tbat tbe agent was withholding remittances, but it did not comply with its representations in endeavoring to ascertain what tbe fact was. There is hardly a pretense of having complied with tbe agreement to inspect and audit books and accounts and to ascertain what accounts were unpaid.

Tbe question arising on tbe application, therefore, is not whether we. are confronted with conditions precedent or warranties, but whether the representations made affect the plaintiff's right of recovery in any aspect of the case.

The bond provided that the employer should observe “all due and customary supervision over said employee for the prevention of default, and that there shall be a careful inspection of the accounts and books of said employee at least once in every twelve months from the date of this bond,” etc. We think this provision of the bond determined what was required in the way of inspection and supervision and superseded what was stated in the application and waived any other or further requirement in reference thereto. The applicant was required to do certain specific things in the way of inspection and to exercise due and customary supervision over the agent, by the terms of the^ond. The surety substituted its own requirements for the things which the applicant said it would do.

The bond provided that the employer should immediately notify the surety of any default on the part of the agent. The evidence does not disclose whether this notice was given or not. Ueither is there any evidence on the question of whether the plaintiff exercised “due and customary supervision” over its agent. If it was incumbent on the plaintiff to show that notice of the default was given or that it exercised due and customary supervision over, its employee, as a condition precedent to its right of recovery, then a verdict should Rave been, directed for tRe defendant. If tRese were defensive matters, the ruling of tRe court, was rigRt. TRe bond in question was an indemnity contract entered into by tRe defendant for a money consideration. It Ras all tRe essential features of an insurance contract and sRould be subject to tRe rules of construction applicable to sucR contracts. Champion Ice Mfg. & C. S. Co. v. Am. B. & T. Co. 115 Ky. 863, 75 S. W. 197; Title G. & S. Co. v. Bank of Fulton, 89 Ark. 471, 117 S. W. 537; Bank of Tarboro v. Fidelity & D. Co. 128 N. C. 366, 38 S. E. 908. It being apparent that tRe bond sued on was prepared by tRe defendant, as to any ambiguity therein tRe provisions, conditions, and exceptions of tRe bond wRicR tend to work a forfeiture sRould be construed most strongly against tRe party preparing tRe contract. French v. Fidelity & C. Co. 135 Wis. 259, 265, 115 N. W. 869; Am. S. Co. v. Pauly, 170 U. S. 133, 144, 18 Sup. Ct. 563. We think the two provisos referred to sRould be Reid to be conditions subsequent which the defendant must plead and imove as part of its defense, if it relies on them to defeat the plaintiff’s cause of action. Redman v. Ætna Ins. Co. 49 Wis. 431, 435, 439, 4 N. W. 591; Johnston v. Northwestern L. S. Ins. Co. 94 Wis. 117, 119, 68 N. W. 868; Goldman v. Fidelity & D. Co. 125 Wis. 390, 392, 395, 104 N. W. 80; French v. Fidelity & C. Co., supra. TRese cases, if not strictly in point in the case at bar, certainly establish a principle that is applicable to it. There is no recital in the bond declaring the clauses to be conditions precedent, and where two constructions are admissible the court sRould lean toward that which- obviates a forfeiture.

We deem it unnecessary to discuss the other point raised by appellant’s counsel.

By the Court. — Judgment affirmed.

TRe following opinion was filed June 21, 1911: