Atlas Assur. Co. v. Lawrence

• Decision Date: 29 August 1929
• Docket Number: No. 8571.,8571.
• Citation: 34 F.2d 401
• Parties: ATLAS ASSUR. CO., LIMITED, OF LONDON, ENGLAND, v. LAWRENCE.
• Court: U.S. Court of Appeals — Eighth Circuit

34 F.2d 401 (1929)

ATLAS ASSUR. CO., LIMITED, OF LONDON, ENGLAND, v. LAWRENCE.

No. 8571.

Circuit Court of Appeals, Eighth Circuit.

August 29, 1929.

A. W. Cupler, of Fargo, N. D. (B. G. Tenneson, L. U. Stambaugh, and N. G. Tenneson, all of Fargo, N. D., and Hicks & Folonie, of Chicago, Ill., on the brief), for appellant.

Matthew W. Murphy, of Fargo, N. D. (Herbert G. Nilles, of Fargo, N. D., on the brief), for appellee.

Before STONE, BOOTH, and GARDNER, Circuit Judges.

GARDNER, Circuit Judge.

Appellant, who was plaintiff in the lower court, brought this action at law against the appellee, who was defendant in the lower court, to recover $4,221.84 as damages for breach of a bond. It is alleged in the complaint that on or about the 10th of June, 1922, one Roy T. Bristol, as principal, and the defendant as surety, executed a bond, which was conditioned, among other things, that the said Roy T. Bristol should keep true accounts of all moneys and other securities received by him as general agent for the plaintiff, and pay over the same to the plaintiff monthly or oftener as demanded; that said Roy T. Bristol, after the execution of the bond and while acting as general agent of the plaintiff under the terms of his employment and said bond, failed and neglected to keep true and correct accounts of all moneys received by him as such agent, but collected and failed to pay over to plaintiff $4,221.84 which was the property of plaintiff. Notice to and demand upon the defendant are alleged and his failure to pay the amount claimed to be due.

The answer admits the execution of the bond, but in effect denies all other material allegations except such as are formally admitted; alleges that there was no consideration for the signing of the bond; that if otherwise liable defendant is exonerated as a surety or guarantor under and by virtue of the terms of section 6681 of the Civil Code of North Dakota (Comp. Laws 1913), which provides as follows: "A surety is exonerated: (1) In like manner with a guarantor; (2) to the extent to which he is prejudiced by any act of the creditor which would naturally prove injurious to the remedies of the surety or inconsistent with his rights, or which lessens his security; or (3) To the extent to which he is prejudiced by an omission of the creditor to do anything when required by the surety which it is his duty to do."

Trial by jury was specifically waived and the issues tried to the court. The lower court entered judgment dismissing plaintiff's complaint. From this judgment the plaintiff has appealed to this court, assigning as errors the refusal of the court to make findings of fact and declarations of law as submitted and in granting the motion of defendant for judgment of dismissal.

It is the contention of the defendant: (1) That the instrument sued upon in this action as a bond was at most only an offer of guaranty, which required notice of acceptance; (2) that the contract of employment between the principal named in the bond and plaintiff was materially altered without the knowledge or consent of the defendant, and hence he was released from all obligation under the bond; (3) that the bond was prospective in its operation and that the liability of the defendant did not extend to pre-existing debts of the principal named; and (4) that in any event he was not liable on the bond for the payment of any indebtedness of the principal in conducting his local agency.

On the other hand, it is the contention of appellant that the bond in question was not an offer of guaranty, but was an absolute obligation; that the amendment of the contract between the principal and plaintiff did not release the defendant from the bond; and that the undisputed evidence showed that the plaintiff was entitled to judgment against the defendant for the amount claimed.

It appears without dispute that Roy T. Bristol entered the employ of the plaintiff as its general agent in February, 1922, under certain written contracts appearing in the record as Exhibits A and B. By the terms of the contract Exhibit A, which is dated February 1, 1922, Bristol was appointed general agent for the writing of farm business against the hazards of fire and tornado and such other classes and hazards as might from time to time be mutually agreed upon, for all territory in the state of North Dakota, or such other territory, as might be agreed upon. The contract fixed the authority of the agent with reference to the appointment of special agents and solicitors, the issuance and rejection of applications for insurance, etc. Article 2 provided the basis of compensation. Article 3 provided that the contract should take effect February 1, 1922, and that it might be terminated at any time by either party giving 60 days' written notice. It also contained the following provision: "The general agent agrees to furnish such bond as may be required by said company, the premium thereon to be paid jointly and equally by said general agent and said company."

Exhibit B is a similar contract by which Bristol was appointed general agent of the hail department of the plaintiff for the state of North Dakota. The terms of this contract were substantially identical with those of Exhibit A, and it contained a provision identical with that quoted from Exhibit A relative to the furnishing of a bond.

After the signing of the bond in question, these contracts were amended so as to change the amount of compensation to be received by Bristol. This amendment was in writing, dated Chicago, March 23, 1923, and Fargo, N. D., on March 26, 1923, and by its terms was to be considered effective as of March 1, 1923.

The amount of the defalcation is not disputed, but it is the claim of the defendant that there was included therein the sum of $520.22 arising out of the local agency of Bristol at Fargo, and that this liability was not covered by the bond, and it is also claimed that the money making up the amount of the defalcation had been collected and presumably appropriated before the execution of the bond, and that it was therefore not within the terms of the bond as properly construed.

The plaintiff was not present at the time the bond was signed by the defendant, and defendant received no notice that the plaintiff had accepted the bond, nor did he receive personally any compensation for executing the bond.

As this contract was signed in North Dakota, and was to be performed in North Dakota, it is important to note certain of the North Dakota statutes in force in that state at the time of these transactions. Those having a possible bearing upon the questions involved are as follows:

"Definition of Guarantor and Suretyship.

"Section 6651. Defined. A guaranty is a promise to answer for the debt, default or miscarriage of another person."

"Section 6675. Defined. A surety is one who at the request of another and for the purpose of securing to him a benefit becomes responsible for the performance by the latter of some act in favor of a third person or hypothecates property as security therefor."

"Creation of Liability.

"Section 6653. Consideration for. When a guaranty is entered into at the same time with the original obligation or with the acceptance of the latter by the guarantee and forms with that obligation a part of the consideration to him, no other consideration need exist. In all other cases there must be a consideration distinct from that of the original obligation."

"Section 6656. Acceptance necessary. A mere offer to guaranty is not binding until notice of its acceptance is communicated by the guarantee to the guarantor; but an absolute guaranty is binding upon the guarantor without notice of acceptance."

"Rights of Surety and Guarantor: Are Equal and Coextensive.

"Section 6682. Same as guarantor. A surety has all the rights of a guarantor whether he becomes personally responsible or not."

"Section 6681. How exonerated. A surety is exonerated:

"1. In like manner with a guarantor.

"2. To the extent to which he is prejudiced by any act of the creditor which would naturally prove injurious to the remedies of the surety or inconsistent with his rights or which lessens his security; or,

"3. To the extent to which he is prejudiced by an omission of the creditor to do anything when required by the surety which it is his duty to do."

"When Exonerated.

"Section 6668. When exonerated. A guarantor is exonerated, except so far as he may be indemnified by the principal, if by any act of the creditor without the consent of the guarantor the original obligation of the principal is altered in any respect, or the remedies or rights of the creditors against the principal in respect thereto is in any way impaired or suspended."

"Section 6670. Guarantor once exonerated not liable. The rescission of an...