American Surety Co. v. Republic Casualty Co.

• Decision Date: 30 July 1930
• Docket Number: No. 8767.,8767.
• Citation: 42 F.2d 807
• Parties: AMERICAN SURETY CO. OF NEW YORK v. REPUBLIC CASUALTY CO.
• Court: U.S. Court of Appeals — Eighth Circuit

42 F.2d 807 (1930)

AMERICAN SURETY CO. OF NEW YORK v. REPUBLIC CASUALTY CO.

No. 8767.

Circuit Court of Appeals, Eighth Circuit.

July 30, 1930.

F. N. Furber, of Minneapolis, Minn. (Fowler, Carlson, Furber & Johnson, of Minneapolis, Minn., on the brief), for appellant.

Ernest E. Watson, of Minneapolis, Minn., for appellee.

Before KENYON, BOOTH, and GARDNER, Circuit Judges.

KENYON, Circuit Judge.

Appellee casualty company brought action in the United States District Court for the District of Minnesota against Hiram D. Brugger and the American Surety Company of New York to recover for misapplication of premiums on insurance policies received by said Brugger while acting as agent of appellee pursuant to the terms of an agency agreement dated November 1, 1923. Recovery was sought against appellant surety company because of the terms of a bond issued by it protecting the casualty company against pecuniary loss, not exceeding $10,000, as might be sustained by acts of fraud, embezzlement, etc., on the part of Hiram D. Brugger, or by his willful misapplication directly or through connivance with others of funds belonging to his employer. It was the claim of the casualty company that the amount of its funds misapplied by Brugger was the sum of $9,868.69.

At the close of the evidence, both parties moved, without reservation, for a directed verdict. The jury was discharged, and the court made certain findings of fact and conclusions of law in favor of appellee's contention, holding that Brugger had misappropriated funds of the casualty company while acting as its agent and that the surety company was liable therefor on its bond, and entered judgment against Brugger and the American Surety Company for the sum of $10,368.69, with interest on $9,868.69 at 6 per cent., and for costs. Thereafter the surety company and Brugger moved the court to vacate and set aside the judgment, to amend the findings of fact and conclusions of law, and for a new trial. This motion was denied. The surety company appeals from the judgment.

The motions to direct verdicts made by both parties without any reservations authorized the court to pass on the facts, and this court is concluded by such findings if there was substantial evidence to support them. The rule is stated in Williams v. Vreeland, 250 U. S. 295, 298, 39 S. Ct. 438, 439, 63 L. Ed. 989, 3 A. L. R. 1038, as follows: "The established rule is: `Where both parties request a peremptory instruction and do nothing more they thereby assume the facts to be undisputed and, in effect, submit to the trial judge the determination of the inferences proper to be drawn therefrom.' And upon review a finding of fact by the trial court under such circumstances must stand if the record discloses substantial evidence to support it." See, also, Commissioners of Road District v. St. Louis Southwestern Ry. Co., 257 U. S. 562, 42 S. Ct. 250, 66 L. Ed. 364; Aetna Ins. Co. of Hartford, Conn., v. Licking Valley Milling Co. (C. C. A.) 19 F.(2d) 177; Clapper v. Gamble (C. C. A.) 28 F. (2d) 755; Russell Wheel & Foundry Co. v. United States (C. C. A.) 31 F.(2d) 826; Hookway v. First Nat. Bank (C. C. A.) 36 F.(2d) 166.

Under this condition of the record some of the questions, to which reference will later be made, argued by appellant, are not properly before us. The conclusions of law of the court that judgment should be entered against Brugger and the surety company necessarily follow if the findings of fact are to stand. Therefore the only question before us is whether or not such findings are supported by substantial evidence. The first eighteen findings are conceded in appellant's brief to be substantially correct. Appellant moved to amend findings 19 to 28, inclusive, also finding 30, and moved to amend the conclusions of law. The motions to amend findings of fact from 19 to 26 amounted to requests to the court to find that the provisions of the agency contract between the casualty company and Brugger were departed from without the knowledge or consent of the surety company, in that the business of the agency was in fact conducted by a corporation of the state of Minnesota known as the H. D. Brugger Company, which was known to the casualty company.

It is apparent that these motions to amend the findings of fact raised the real question in this case, viz. Was the agency of H. D. Brugger established by the agreement of November 1, 1923, taken over by the H. D. Brugger Company, a corporation, and, if so, was it with the knowledge and acquiescence of appellee, and without the knowledge and consent of the surety company? If it was taken over with the acquiescence of the casualty company and without the consent of the surety company, and the H. D. Brugger Company, a corporation, was accepted in place of H. D. Brugger, an individual, as the collector of the premiums for business written, the conditions of the bond would not be breached, as the misapplications would have been the acts of the corporation and not of Brugger personally, and the surety company would not be liable on the bond. The facts necessarily inhering in a solution of this question were found by the court in favor of appellee. Is there substantial evidence in the record to sustain such findings?

The agency agreement was made November 1, 1923. It remained in effect until February 28, 1926. Notice of cancellation thereof was received by Brugger in October, 1925, to be effective December 31, 1925. He prevailed upon the casualty company to postpone the date of cancellation until February 28, 1926, Brugger continuing to write insurance and collect premiums belonging to the casualty company up to February 28, 1926. All the alleged misapplications of funds occurred after receipt of notice of cancellation. During the period of the agency, Brugger was also agent for other insurance companies and all collections of premiums were deposited in one common fund, and all remittances were made therefrom. This business of the agency covered general lines of insurance, exclusive of life insurance.

The original copartnership was the Brugger-Kronzer Company, composed of Hiram D. Brugger and Walter H. Kronzer. When they were appointed agents of the casualty company as of July 1, 1921, the surety company furnished as to each a $10,000 bond to protect said company. Bond No. 578722A in which Brugger was principal, is the one here sued upon. This copartnership was incorporated about March 1, 1923, as Brugger-Kronzer & Co., and a new agency contract was entered into between it and appellee. This agency continued until November 1, 1923, when Hiram D. Brugger entered into the new agency contract, out of which arose the matters at...