Aetna Indemnity Co. v. Ladd

• Decision Date: 06 February 1905
• Docket Number: 1,106.
• Citation: 135 F. 636
• Parties: AETNA INDEMNITY CO. v. LADD et al.
• Court: U.S. Court of Appeals — Ninth Circuit

135 F. 636

AETNA INDEMNITY CO. v. LADD et al.

No. 1,106.

United States Court of Appeals, Ninth Circuit.

February 6, 1905

[Copyrighted Material Omitted]

The AEtna Indemnity Company, the plaintiff in error, a corporation organized under the laws of the state of Connecticut, having among other powers that of prosecuting a general surety business, and, as surety, to execute all classes of bonds and undertakings, including contractors' bonds, had prior to March, 1902, complied with the laws of the states of Washington and Oregon regulating foreign surety companies, and, through its agents, Clemens & O'Bryan, of Portland, Or., was engaged in the surety business in both said states. On January 7, 1902, the board of directors of the plaintiff in error had passed the following resolution 'Voted: That W. J. Clemens be and he is hereby appointed attorney in fact for this company, and that he be and he is hereby authorized and empowered to execute and deliver and attach the seal of the company to any and all bonds and undertakings for or on behalf of the company in the business of guaranteeing the fidelity of persons holding places of public or private trust and the performance of contracts other than insurance policies, and executing or guaranteeing bonds and undertakings required or permitted in all actions or proceedings or by law required. ' On April 2, 1901 the board of directors passed the following resolution: 'Voted: That W. J. Clemens and J. H. O'Bryan be and they hereby are appointed resident assistant secretaries of this company at Portland, Oregon, and that each one of them be and he is hereby authorized and empowered to execute and deliver and attach the seal of the company to any and all bonds and undertakings for or on behalf of the company in its business of guaranteeing the fidelity of persons holding places of public or private trust and the performance of contracts other than insurance policies, and executing or guaranteeing bonds and undertakings required or permitted in all actions or proceedings or by law required, such bonds and undertakings, however, to be attested in every instance by W. W. Cotton, attorney in fact. ' On April 29th the plaintiff in error executed to their agents the following certificate: 'This is to certify that Clemens & O'Bryan of Portland, Or., are hereby appointed agents for the AEtna Indemnity Company, and are authorized to perform all acts and duties incidental to such appointment. ' Clemens & O'Bryan, as such agents, had the power to appoint and did appoint their subagents at different cities in Oregon and Washington. Their subagents so appointed at Tacoma were Seeley & Co. Clemens & O'Bryan had been instructed by the plaintiff in error, in cases where the latter became surety for contractors, to take from such contractors collateral agreements or counter agreements executed in its own favor and for its own protection, and, in cases where such contractors became unable to complete or carry on their contracts, to take assignments of such plant as they might own, in order that the plaintiff in error might use the same in the prosecution of such contract to completion.

The Hardy Shipbuilding Company, a corporation of the state of Washington, was operating a shipbuilding plant at Tacoma. It was about to enter into contracts with the firm of Sudden & Christensen, of San Francisco, for the construction of a barkentine afterwards known as the 'John C. Meyer,' with A. W. Horn for the construction of a steamboat afterward known as the 'Georgia,' and with the Pacific Cold Storage Company for the construction of a barge. Bonds for the fulfillment of these contracts were required by Sudden & Christensen in the sum of $15,000, by A. W. Horn in the sum of $10,000, and by the Pacific Cold Storage Company in the sum of $2,000. The Hardy Shipbuilding Company made application to Seeley & Co., subagents of the plaintiff in error, requesting that the latter become surety upon such bonds. The application was transmitted to Clemens & O'Bryan, the general agents; and, in consideration of a premium of 1 per cent. paid on the amounts of said bonds, the plaintiff in error became the surety, and guarantied in those amounts the performance of said contracts. The Hardy Shipbuilding Company executed to the plaintiff in error in each case the counter agreement so provided for, in which it agreed, among other things, that, in case it became unable to complete its contracts, it would assign its plant and property to the plaintiff in error, in order that the latter might prosecute such contracts to completion, and it authorized the latter to receive all deferred payments in the event of such breach of contract or default on its own part. The application, bonds, and counter agreements were forwarded by Clemens & O'Bryan to the home office of the plaintiff in error. About May 13, 1902, Clemens & O'Bryan were notified by their subagent at Tacoma that the Hardy Shipbuilding Company was in trouble. On the day following, Mr. O'Bryan went to Tacoma, and there ascertained that there were outstanding pay checks on the April pay roll of the shipbuilding company of about $5,000, payable on May 10th, and that there were no funds available to pay the same. On examining the books of the shipbuilding company, and upon the representations of Mr. Hardy that the embarrassment was temporary only, he telegraphed to Sudden & Christensen, of San Francisco, requesting them to make an advance of $6,000 upon the next payment to fall due upon the John C. Meyers contract. Sudden & Christensen answered that they would do so upon the authority of the AEtna Indemnity Company, which authority was accordingly given by Clemens & O'Bryan, as general agents of that company. A representative of Sudden & Christensen met Mr. Seeley, the subagent, and Mr. O'Bryan and Rm. Hardy, in Tacoma, on May 16th. O'Bryan presented an order which had been given him the day before by the Hardy Shipbuilding Company, addressed to Sudden & Christensen, and requesting them to pay as follows: 'Please pay the $6,000.00 that you have to-day consented to advance on barkentine contract to the AEtna Indemnity Company, who will disburse the money in payment for labor and material thereon. ' Sudden & Christensen thereupon paid to O'Bryan the $6,000, and the money was deposited in a bank at Tacoma to the joint credit of the plaintiff in error and the Hardy Shipbuilding Company. The board of trustees of the Hardy Shipbuilding Company had on May 15th adopted a resolution reciting the facts in the case, and thus concluding: 'Be it resolved: That the president and secretary of this company be, and they are, hereby authorized to execute in the name of the company an assignment of the interests of this company of the aforesaid contracts as security for the payment of the said sum of six thousand dollars. ' On May 16th the shipbuilding company executed to the plaintiff in error an assignment of all its right, title, and interest in the three contracts. O'Bryan then put Seeley & Co. in charge of the plant and the unfinished vessels, and returned to Portland. On May 27th Clemens & O'Bryan wrote to the plaintiff in error in regard to the embarrassment of the shipbuilding company and its unfinished contracts; stating that, in their opinion, there was a profit in each contract, and added: 'However, as we helped them out by giving our authority to Sudden & Christensen to make an advance payment, we took an assignment of all their contracts, copy of which we enclose herewith, and at the same time, until these contracts are finished, all money of the firm is deposited in the name of the Hardy Shipbuilding Company and the AEtna Indemnity Company, and all checks are signed by Mr. Hardy, President of the Shipbuilding Company, and countersigned by our Tacoma agent, Mr. Seeley, and every check must show for just what contract it is for. ' On June 10th the plaintiff in error wrote, acknowledging the receipt of that communication. From and after May 16th, Seeley continued in possession and charge of the shipyard and the work on the vessels covered by the three contracts.

About the middle of June, one Ralph W. Smith, who held a chattel mortgage on the shipbuilding plant, proceeded to foreclose it, and placed the sheriff in charge of the yard, thereby causing the work therein to cease. Thereupon Mr. Clemens induced the Pacific National Bank, which held a mortgage on the real estate of the yard, to institute a foreclosure suit. The suit was begun, Smith was made a party defendant, and sale under his chattel mortgage was enjoined. By the authority of Clemens & O'Bryan, the firm of Remington & Reynolds appeared as attorneys therein for the plaintiff in error, and filed in its name a complaint in intervention, in which it was alleged as follows: 'That on or about said 15th day of May, 1902, pursuant to and in accordance with the terms and provisions of the hereinbefore described agreement set out in paragraph 15 of this complaint, the said Hardy Shipbuilding Company and John B. Hardy, being unable to carry on the aforementioned contracts, or either of them, did duly assign, transfer, and set over to the said intervener both of the said shipbuilding contracts, together with the said shipbuilding plant, including all said shops, machines, tools, implements located on the premises hereinbefore described, and on or about said 15th day of May, 1902, did place the said intervener in possession of the said real estate, and did duly deliver to said intervener the actual, exclusive, undisputed, open, notorious, and visible possession of all shops, implements, tools, machines, materials, and supplies, and all personal property of every nature, kind, or description, located on the real estate above described, and ever since...