Hartford Acc. & Indem. Co. v. Anderson, s. 8458

• Decision Date: 11 January 1968
• Docket Number: Nos. 8458,8458A,s. 8458
• Citation: 155 N.W.2d 728
• Parties: HARTFORD ACCIDENT AND INDEMNITY COMPANY, Plaintiff and Respondent, v. Grace ANDERSON, Defendant and Appellant.
• Court: North Dakota Supreme Court

Page 728

155 N.W.2d 728

HARTFORD ACCIDENT AND INDEMNITY COMPANY, Plaintiff and Respondent, v. Grace ANDERSON, Defendant and Appellant.

Nos. 8458, 8458A.

Supreme Court of North Dakota.

Jan. 11, 1968.

Rehearing Denied Jan. 31, 1968.

Syllabus by the Court

1. The parol evidence rule does not apply unless the parties have assented to a certain writing as the statement of a contract between them. accordingly, it may be shown by parol evidence that a writing was not executed or delivered as a contract or that assent thereto was impaired by fraud, illegality, duress, mistake, or failure of consideration, rendering the contract void or voidable.

2. When one of two innocent persons must suffer by the act of a third, he by whose negligence it happened must be the sufferer. N.D.C.C. Sec. 31--11--05(34).

3. The acts or declarations of an alleged agent cannot be used to establish his agency in the absence of evidence tending to show the principal's knowledge of such acts or declarations and his assent to them.

4. When a principal obligor has induced his surety or guarantor to sign an instrument by false or fraudulent representations, such misrepresentations may not be set up by the surety or guarantor as a defense to an action on the endorsement or guaranty unless the obligee or guarantee has notice of or has participated in the fraud.

5. For reasons stated in the opinion the plaintiff must be considered an innocent party; and, applying the rule that when one of two innocent persons must suffer by the act of a third, he by whose negligence it happened must be the sufferer, the defendant must be the sufferer.

6. When a certificate of acknowledgment appears regular on its face, the certificate is presumed to state the truth.

7. When the requirements of a notary's acknowledgment and of the signature of a disinterested witness were for the benefit of one party to a contract, that party could waive those requirements without serving notice of such waiver upon the other party to the contract and without affecting the validity of the contract.

8. Attorney fees may not be taxed against a losing party unless specifically authorized by statute.

Mackoff, Kellogg, Kirby & Kloster, Dickinson, for appellant.

Zuger, Zuger & Bucklin, Bismarck, for respondent.

ERICKSTAD, Judge.

Hartford Accident and Indemnity Company, which we shall hereafter refer to as Hartford, brought two actions against Mrs. Grace Anderson to recover under the terms of a general indemnity agreement for funds it paid out in connection with liability incurred on two contract bonds written for her former husband, Ray Anderson. The cases were consolidated for trial before the court without a jury and resulted in two judgments in favor of Hartford in the amounts of money paid out on the two bonds.

Mrs. Anderson has appealed from both judgments, asking a trial de novo in this court.

She concedes that she signed the indemnity agreement upon which these two actions are based but asserts that her husband, at the request of Hartford and thus as its agent, requested her to sign it; that she signed it without reading it and only after she had been informed by her husband that it was a bond and that he needed her signature so that he might bid a particular job; that in signing it she relied on her husband's representation that it was a bond for a particular job; that she did not deliver the agreement to Hartford after signing it nor authorize her husband to deliver it to Hartford; that she at no time acknowledged her signature before a notary public or a disinterested witness, whereas the indemnity agreement required such a witness and such an acknowledgment; and that for these reasons the agreement should be of no effect and she should be freed from any liability to Hartford.

Under the terms of the indemnity agreement the Andersons were obligated to indemnify Hartford for funds it was required to pay out in connection with bonds issued on Mr. Anderson's behalf. The agreement was dated August 28, 1957, and covered bonds issued to Mr. Anderson before that date as well as afterward. This litigation involves bonds which were written for Mr. Anderson on July 1, 1962, and April 11, 1963.

At the end of the agreement after the recitation of the instrument that the undersigned had duly executed the document and before the space provided for the signatures appears the following:

NOTE: Each undersigned's address must be given, and each undersigned's signature must be witnessed by at least one disinterested person.

The Principal named in the Bond must always join with the Indemnitors in the execution of this agreement, all signatures to be sworn to in the spaces provided below.

The trial court found that Mrs. Anderson had not acknowledged her signature before a notary, although the indemnity agreement asserts that she appeared before Mr. Roy L. Herhusky, a notary public of Stark County (and agent for Hartford), and acknowledged that she executed the agreement. The court concluded that the requirement that the signatures must be witnessed by disinterested persons and be acknowledged before a notary public was for the benefit of Hartford and therefore could be waived by Hartford. It accordingly ruled in Hartford's favor.

Before we may consider Mrs. Anderson's contentions, we must meet Hartford's argument that the trial court erred in accepting evidence of what Grace Anderson was told by her husband Ray Anderson as to the contents of the document and the negotiations leading to its signature. It is Hartford's view that receipt of this testimony constituted the receipt in evidence of parol evidence to vary the terms of a written agreement, which it asserts is prohibited by N.D.C.C. Sec. 9--06--07. In support of its position that parol evidence should not have been received in this case, Hartford refers us to Hanes v. Mitchell, 78 N.D. 341, 49 N.W.2d 606 (1951), and to Oliver-Mercer Electric Cooperative, Inc. v. Fisher, 146 N.W.2d 346 (N.D.1966).

There is much in Hanes to support the court's position under the facts of that case. It is interesting, however, that although the court confirmed the trial court in rejecting parol evidence of a prior oral agreement in Hanes, it quoted with approval an earlier opinion as follows:

'A written contract should be exclusive evidence of the agreement made and contained therein so far as it deals with all the subject-matter of the contract, unless such contract is procured through fraud, either actual or constructive, undue influence, restraint, deception, in a dishonest manner, or by false representations which induce the signing of the contract, or unless there is a mutual mistake of law by both parties, a misapprehension of the law by one party of which the other party was aware at the time of making the contract, which was not rectified, or some other illegal manner.'

Hanes v. Mitchell, 78 N.D. 341, 49 N.W.2d 606, 608--609 (1951), quoting Gilbert Mfg. Co. v. Bryan, 39 N.D. 13, 166 N.W. 805, 808 (1918).

In Hanes fraud was not alleged and the offer of proof was found insufficient to establish alleged mistakes of fact and law.

An examination of Oliver-Mercer discloses that it also may be distinguished on its facts, as fraud was not alleged in that case either.

It is our view that the trial court was correct in receiving parol evidence in the instant case under the rule expressed in Carufel v. Kounts, 60 N.D. 91, 232 N.W. 609, 611 (1930).

'The parol evidence rule does not become applicable unless the parties have assented to a certain writing or writings as the statement of a contract between them. Accordingly it * * * may be shown by parol evidence that a writing was never executed or delivered as a contract, or that assent thereto was impaired by fraud, illegality, duress, mistake, or failure of consideration, rendering the contract void or voidable. * * * ' Williston on Contracts, § 634.

Carufel v. Kounts, supra.

Some crucial facts and pertinent testimony follow:

Mr. Herhusky, Hartford's agent at Dickinson, received the general indemnity agreement from Hartford's Minneapolis office with instructions that it should be executed by both Mr. and Mrs. Anderson and returned to the home office. He stated that the company informed him that it was necessary that both husband and wife sign the agreement because the financial statement disclosed that each owned separate property. He said that Hartford had issued bonds to Ray Anderson individually before the time that Hartford solicited the execution of the general indemnity agreement, and that after securing the general indemnity agreement they continued to issue bonds to Mr. Anderson.

Mr. Anderson testified by deposition that he brought the general indemnity agreement from Mr. Herhusky's office in Dickinson to his home in Bismarck, where he asked his wife to sign it. He said that she became very angry when he asked her to sign the agreement and that she did not sign it at that time, but that he left the house and when he returned he found the signed agreement lying on the kitchen table. He said that thereafter he placed the agreement in an envelope and mailed it or took it to Mr. Herhusky at Dickinson.

Part of Mr. Anderson's testimony relating to what was said and what happened when he asked his wife to sign the agreement follows:

Q. * * * Can you tell me what you told her and how this got signed up?

A. Well, I told her, 'Roy says to sign this thing. I've got to get this thing straightened out right now because we've got to have bonds,' and she got madder than the devil and said, 'I don't want to have nothing to do with this bond business,' and that was all right now. So--but later she did sign it and I sent it back.

Q. Did she sign it in front of you?

A. No.

Q. How did she sign it then?

A. It laid there on the table and she went to work, very angrily, and then I come home later on in the day and it was signed and I just stuck it in an envelope. If I remember right, I don't think...