Dwelling House Ins. Co. v. Johnston

• Decision Date: 05 February 1892
• Court: Michigan Supreme Court
• Parties: DWELLING-HOUSE INS. CO. OF BOSTON, MASS., v. JOHNSTON et al.

51 N.W. 200

90 Mich. 170

DWELLING-HOUSE INS. CO. OF BOSTON, MASS., v. JOHNSTON et al.

Supreme Court of Michigan

February 5, 1892

Error to circuit court, Kent county; ALLEN C. ADSIT, Judge.

This was an action on a bond brought by the Dwelling-House Insurance Company of Boston, Mass., against David A Johnston, principal, and David Forbes and Lyman Austin sureties. There was a judgment as against Johnston but in favor of the sureties, and plaintiff appeals. Reversed.

Everett D. Comstock, for appellant.

D E. Corbitt, for appellees.

MCGRATH J.

This is debt upon a bond given by defendant Johnston, plaintiff's agent, upon which defendants Forbes and Austin were sureties. Johnston had acted as agent of plaintiff at Grand Rapids from 1886 to some time in 1890. In December, 1888, plaintiff notified the sureties that Johnston was in arrears in the sum of $290, and that the company would have to look to the sureties for the amount of the deficit. Defendants claim that, upon receipt of this notice, the sureties called upon Johnston, and, after some negotiations, on January 12, 1889 the sureties indorsed Johnston's notes for $250, and with the proceeds, and the sum of $40 added by the agent, Johnston purchased a draft for $290, and forwarded it to plaintiff. These notes the sureties were afterwards compelled to pay. On the same day that the draft was sent by the agent the sureties wrote to the company, reciting that they had just furnished the money to enable Johnston to square up his accounts, and caused a draft to be sent for the amount, and that thereafter they should insist upon monthly settlements between the company and Johnston, or they should not be responsible upon the bond. Upon January 15, 1889, the company wrote the sureties as follows: "We have intended to write you for some time past in connection with the agency balance of D. A. Johnston, about which you wrote to us recently. We have now much satisfaction in informing you that Mr. Johnston has remitted us the full balance of his indebtedness up to the 1st of January, and we have every reason to believe that from this time out he will keep his account up close, in good shape." After the receipt of this letter, the sureties saw Johnston frequently, and he informed them that he was making monthly statements to the company, and settling with it each month. The sureties heard nothing from the company until December 11, 1889, when they received the following letter: "Mr. D. A. Johnston whose bond you signed, with a surety, has been promising to remit the balance due the company for some time. We have written him repeatedly, but he lately spoke about negotiating a sale of his agency or taking a partner. At any rate, he has failed to keep his promise, and we must look to you for the balance due, amounting to $104.27. That is for premiums on business written during the past year. We will be much obliged if you will either see that he remits the amount or send your own check for the same." On receipt of this letter the sureties replied as follows: "Yours of the 11th is at hand. In reply we can only say that we informed you several months ago that we would not be responsible for any more of his business, but it seems you have allowed him to continue business as before. We intend to pay no more of his accounts, and we require that you return us the bond. If you intend to try and collect any more money of us, you might as well commence now as at any time. Let us have the matter settled." It appeared that in the mean time Johnston had continued to act as agent of the company, had reported at the end of each month his receipts, but had not forwarded the moneys collected with the reports, and the company had not insisted upon monthly settlements. The total amount so reported from month to month, during the time from January 15, 1889, to July 1 1889, was $115.48. It further appeared that the company received no reports from Johnston after the report for the month of June, 1889, but that the company did not disturb him in his agency, supposing, as it claims, that he was doing no business, until March, 1890, when the company sent some one from the home office to Grand Rapids, who discovered that Johnston had been continuing to issue policies and collect premiums, and that there was a further deficit of $91.09, making a total of $206.45, which amount the company claim they should be allowed to recover. It appeared that the company had intrusted to Johnston blank policies, duly signed and sealed by the officers of the company, and numbered consecutively between certain given numbers. The jury found a verdict for plaintiff as against Johnston, but in favor of...