United States Fidelity & Guaranty Co. v. Wilson

• Decision Date: 07 May 1930
• Docket Number: No. 8676.,8676.
• Citation: 41 F.2d 319
• Parties: UNITED STATES FIDELITY & GUARANTY CO. v. WILSON.
• Court: U.S. Court of Appeals — Eighth Circuit

41 F.2d 319 (1930)

UNITED STATES FIDELITY & GUARANTY CO. v. WILSON.

No. 8676.

Circuit Court of Appeals, Eighth Circuit.

May 7, 1930.

A. W. Dobyns, of Little Rock, Ark. (G. B. Rose, D. H. Cantrell, J. F. Loughborough, and A. F. House, all of Little Rock, Ark., and William M. Hall, of Memphis, Tenn., on the brief), for appellant.

Lamar Williamson, of Monticello, Ark., for appellee.

Before STONE and VAN VALKENBURGH, Circuit Judges, and DAVIS, District Judge.

VAN VALKENBURGH, Circuit Judge.

February 25, 1924, the firm of Fischer Freres, of Antwerp, Belgium, desired to intervene in a certain receivership suit then pending in the District Court of the United States at Clarksdale, Miss. On that day appellee, as attorney for that firm, went with one of its members to Mills & Sons, local agents for appellant at Pine Bluff, Ark., where appellee resides, to get a cost bond to be filed in that intervention. There Fischer Freres, by W. Fischer, made application in writing for an open penalty cost bond, carrying a premium of $10. In this application the space after the word "penalty" was left blank. Fischer Freres, being alien nonresidents, were unable to qualify for indemnity to appellant. Therefore appellee on the same day executed with them the following special indemnity agreement annexed to the application:

"The undersigned, hereby agrees to Indemnify and keep the United States Fidelity and Guaranty Company indemnified and hold and save it harmless from and against any and all demands, liabilities, charges and expenses of whatsoever kind or nature, which it may at any time sustain or incur by reason of or in consequence of having executed the above described bond, and we do further guarantee that the charges for executing and continuing upon the bond will be paid as agreed until the Company has been released from liability thereunder."

The federal court at Clarksdale declined to accept an open penalty bond, but required one with a fixed penalty of $10,000, conditioned to cover the payment of all court costs and expenses growing out of the propounding of the claim of Fischer Freres, which might be finally adjudged to be paid, and all costs that might accrue to the receivers. It is conceded that an open penalty bond is one without any fixed penalty. The premium for such a bond is only $10 per annum, it being generally estimated that the costs in a suit do not usually run beyond $1,000. However, the bond being open and unlimited, would cover any amount ultimately assessed. The premium for a bond with a fixed penalty of $10,000 is $100 per annum. Agent Mills sent the application, with attached indemnity agreement, to Mr. Harwell, general manager of appellant at Memphis, Tenn. He also wrote the agents of the company at Clarksdale, Miss., authorizing them, on the faith of the application taken by him, to sign and deliver to appellant a cost bond to be filed in the United States court there. The letter opened with these memoranda:

"Re: Application for Cost Bond Fischer-Frers, of Antwerp, Belgium in U. S. District Court at Clarksdale, Miss. Open penalty 2-25-24. Prem. $10.00."

Mills also gave to Wilson a special letter of introduction to the agents at Clarksdale. There is some testimony to the effect that originally there was executed an open penalty bond in conformity with the application; that, being unacceptable, it was returned to Mr. Mills, was canceled, and delivered to appellee. There is also some confusion in the testimony as to whether more than one $10,000 bond was drawn and tendered. The important fact, however, is that when the bond carrying a penalty of $10,000 was tendered for execution to agent Mitchell at Clarksdale, he thought the amount was excessive, and that the situation called for caution in view of the letter from Mills authorizing the execution of an open penalty bond. He says:

"A. So I went on to the office and thinking that Mr. Mills had not gone into the matter carefully and did not realize the possibility of the costs in this case would run as high as I was advised it would and I called Mr. Harwell over the telephone and told him about it and he replied to us, that it was all right that Mr. Wilson stood well financially, he being an attorney and to make any bond he was having to file in the case, that we had his special indemnity and were relying on that."

Accordingly a cost bond carrying a penalty of $10,000 was executed by appellant as surety and was duly approved and filed. On final hearing the federal court in Mississippi disallowed the intervention of Fischer Freres and taxed costs against them in the sum of $28,000. Judgment was rendered against appellant, as surety, for $10,000, which it paid. Upon appellee's refusal to indemnify appellant this suit was brought. The trial court directed a verdict in favor of appellee.

The complaint, after reciting the application of Fischer Freres to Mills & Sons, appellant's agents at Pine Bluff, Ark., for a cost bond, and the execution of the indemnity agreement by appellee, all as above set out, proceeds as follows:

"The said Mills & Sons then wrote Martin & Mitchell, the agents of the plaintiff in Clarksdale of the application for an open penalty bond and directed them to sign the bond when it was presented to them by the defendant. When the defendant arrived at Clarksdale he discovered that an open penalty bond would not be approved and that it would be necessary for him to file a bond in a fixed penalty of $10,000. He thereupon presented to the said Clarksdale agents of plaintiff a bond with a fixed penalty of $10,000. The said agents at first refused to execute such a bond because they had been directed to sign an open penalty bond, but upon the insistence of the defendant, and after securing authority from H. F. Harwell, and the District Manager of the plaintiff at Memphis, they executed it and it was then filed in court by the defendant."

To these allegations of the complaint appellee made the following answer:

"Admits that Mills & Sons wrote Martin & Mitchell, the agents of the plaintiff in Clarksdale of the application for an open penalty bond and directed them to sign the open penalty bond when it was presented to them by the defendant's client. Admits when the defendant arrived at Clarksdale he discovered that an open penalty bond was requested by plaintiff, but denies that he discovered that it would be necessary for him to file a bond in a fixed penalty of $10,000.00. Denies that he thereupon presented to the said Clarksdale agents of plaintiff a bond with a fixed penalty of $10,000.00. Denies that said agents at first refused to execute such a bond because they had been directed to sign an open penalty bond and denies that upon the insistence of the defendant, and after securing authority from H. F. Harwell, the District Manager of the plaintiff, at Memphis, they executed it and denies that it was then filed in court by the defendant."

Upon the issues thus framed appellant contends that the indemnity agreement signed and delivered by appellee covered the cost bond ultimately tendered, executed, and filed, and that appellee is estopped from denying his liability thereunder. The defenses interposed may practically be condensed and considered under the following heads:

1. That appellee was released by the unauthorized and material alteration of the application of Fischer Freres for the bond involved.

2. That the bond executed was not the bond authorized by the original application, and that appellee's guaranty of indemnity was confined to that application.

3. That liability against appellee, based upon an alleged oral agreement at Clarksdale, Miss., is not permissible under the pleadings.

4. That, if permitted, this claim of appellant would fall before the bar of the Statute of Frauds.

We shall discuss these in their order.

1. The alteration challenged is the insertion in the application, at the office of the general manager of appellant at Memphis, of the figures "$10,000.00" in the blank after the word "penalty." When the application and the indemnity agreement were executed that blank was left unfilled. Under the circumstances of this case we do not deem this so-called alteration fatal to the validity of the instrument involved. In the complaint the penalty inserted is not counted upon as a part of the original instrument, nor as creating a liability as such part. The insertion of these figures is explained in the testimony as a notation made for the benefit of the home office at Baltimore, Md., in computing the amount of reserve it would be obliged to carry because of this liability. At the trial counsel for appellant said, in response to a question by the court: "It is just for their records in the office, and doesn't show liability." It conclusively appears that the insertion was, in effect, a mere memorandum for the home office, and in no sense an effort to alter the terms of the original instrument.

2. It is true that the bond ultimately demanded, tendered, accepted, and filed was not an open penalty bond, contemplated by the terms of the written application as executed in the office of Mills & Sons. The change came about, as disclosed by the record, in the following manner: Upon reaching Clarksdale, Mr. Wilson found that an open penalty bond would not be accepted; that one with a fixed penalty of $10,000 was demanded. Such a bond was prepared and, as Mr. Sivley, opposing counsel in the intervention suit testifies, "was presented by Mr. Wilson on behalf of Fischer Freres over my protest." It appears that there was some difference between counsel, not as to the amount, but with respect to some of the conditions. This bond, thus presented by appellee, was ultimately approved. Mr. Mitchell, appellant's agent at Clarksdale, who executed on behalf of appellant this bond tendered by Wilson, and at his request, testifies thus:

"Q. Did you or did you not tell Mr. Wilson that you would sign the bond for the company...