Illinois Sur. Co. v. Donaldson

• Court: Alabama Supreme Court
• Writing for the Court: McCLELLAN, J. McCLELLAN, J.
• Citation: Illinois Sur. Co. v. Donaldson, 79 So. 667, 202 Ala. 183 (Ala. 1918)
• Decision Date: 09 May 1918
• Docket Number: 6 Div. 431
• Parties: ILLINOIS SURETY CO. et al. v. DONALDSON.

79 So. 667

202 Ala. 183

ILLINOIS SURETY CO. et al. v. DONALDSON.

6 Div. 431

Supreme Court of Alabama

May 9, 1918

On Rehearing, June 20, 1918

Anderson C.J., and McClellan, J., dissenting in part.

Appeal from City Court of Birmingham; John C. Pugh, Judge.

Action by Thomas B. Donaldson, receiver, etc., against the Illinois Surety Company and others. From judgment for plaintiff defendant Surety Company appeals. Reversed and remanded.

This action is for the breach of a surety company's bond given by appellant to the Employers' Indemnity Company. The plaintiff is Donaldson, special deputy insurance commissioner of the state of Pennsylvania, who, in virtue of his office, is in charge of the liquidation of the Employers' Indemnity Company, which formerly did business in Alabama. A.T. De Bow was the person whose fidelity the bond assured, to the amount of $5,000. From a judgment in favor of the plaintiff, based of course upon an adjudicated breach of the bond, the defendant appeals.

The presently material provisions of the bond are these:

"Whereas, A.T. De Bow, hereinafter called the 'employé' occupies the position of general agent in the service of the Employers' Indemnity Company of Philadelphia, hereinafter called the 'employer': ***

"Now therefore, in consideration of the sum of twenty-five and no/100 dollars, paid as a premium for the period from November 1st, 1912, to November 1st, 1913, at 12 o'clock noon, and upon the faith of the said warranties of said employer as aforesaid, it is hereby agreed, that, subject to the obligations imposed by this bond on the employer, the performance of which shall be conditions precedent to the right on the part of the employer to recover under this bond, the company shall, at the expiration of three months next after proof of pecuniary loss, as hereinafter mentioned, has been given to the company, reimburse the employer, to the extent of the sum of five thousand and no/100 dollars, and no further for such pecuniary loss as the employer shall have sustained by any act of larceny or embezzlement upon the part of the employé in the performance of the duties of the office or position in the service of the employer hereinbefore referred to, as such duties have been, or may hereafter be stated in writing by the employer to the company, and occurring during the continuance of this bond, and discovered at any time within six months after the expiration or cancellation of this bond, or in case of the death, resignation or removal of the employé prior to the expiration or cancellation of the bond, within six months after such death, resignation or removal. ***

"That the employer, on his becoming aware of any act which may be made the basis of any claim hereunder, shall, within 10 days, give the company notice thereof by telegraph at the company's expense, and in writing by a registered letter, addressed to the secretary of the company, Chicago, Illinois, and shall, within ninety days after his so becoming aware of such act as aforesaid, file with the company his itemized claim hereunder at his own cost and expense with full particulars thereof duly sworn to; and, if required, the employer shall also produce in support thereof for investigation by the company or its representative at the office of the employer all appropriate books, vouchers and evidence as may be required by the company; and this bond shall become void both as to any existing or future liabilities thereunder unless the aforesaid notice shall have been given as provided for, and unless claim is filed within the time and manner above specified, and until such books, vouchers and evidence (if required) shall have been furnished to the company for investigation as above stated, provided that no claim shall be payable hereunder that shall be filed with the company after the period of six months from the expiration or cancellation of this bond, or after a period of six months from the death, resignation or removal of the employé occurring prior to the expiration or cancellation of this bond. Provided further that there shall be no liability on this bond for any act of larceny or embezzlement committed by the employé after the employer's first becoming aware of any act which may be made the basis of a claim hereunder. ***

"That the employer shall, if so required by the company, duly apply for a warrant for the arrest of the employé for the act of larceny or embezzlement, which is the basis of any claim hereunder, and give all the aid and information in his power (at the cost and expense of the company), to bring the said employé to justice, or to aid the company to sue for and obtain reimbursement from the employé of his estate or third person, of moneys which the company shall have paid or become liable to pay, by virtue of this bond.

"That if without previous notice to and consent of the company thereto, in writing, the employer shall continue the employé in his employment, after having become aware of any act which may be made the basis of any claim hereunder, or make any settlement with the employé for any loss hereunder, or do any act whereby the liability of the employé to him is changed in any material respect, this bond shall be null and void, both as to any existing or future liabilities hereunder, and any willful misstatement or suppression of facts in any claim made hereunder shall render this bond void from the beginning."

The written contract under which De Bow engaged to serve the Employers' Indemnity Company contained these, among other, provisions:

"Witnesseth, that the said party of the first part hereby appoints the said party of the second part its agent, to solicit and procure applications for liability insurance, in the following territory, to wit: State of Alabama; and the said party of the second part accepts the said appointment, which is made and accepted upon the following terms and conditions to be strictly kept and observed by the parties hereto:

"(1) The party of the first part shall not appoint any other agents in said territory to solicit and procure applications for liability insurance.

"The party of the second part shall represent the party of the first part solely and to the exclusion of all other persons, firms or corporations for the purpose of this agreement.

"(2) The

said party of the first part shall not be responsible for any expenses incurred by said party of the second part, in maintaining an office, in procuring applications for insurance, collecting premiums thereon, or for any other purposes whatsoever.

"(3) The said party of the second part shall receive as his sole compensation for services rendered hereunder, commissions at the rate of twenty per cent. (20%) of the net cash premiums actually received by said party of the first part for all contracts of liability insurance and renewals thereof, written by it upon application procured by said party of the second part hereunder. ***

"It is understood, however, that any checks to the order of the said party of the first part received by said party of the second part in payment of premiums shall be at once forwarded to the home office of said party of the first part in the city of Philadelphia; and that the said party of the second part shall have no authority to sign or indorse checks or drafts in the name of the said party of the first part.

"He shall account for, and pay over to the said party of the first part not later than the fifteenth day of each month hereafter, all premiums charged or payments, less his commissions, for contracts of insurance (both new and renewal) collected by him prior to and including the last day of the preceding month. ***

"(6) The said party of the first part reserves the right to collect directly from the assured, any premiums which may remain due and unpaid on the fifteenth day of any month hereafter, upon the contracts written or renewals made forty-five days prior thereto, and the expense of collecting such overdue premiums shall be deducted from the commissions thereon to which said party of the second part may be entitled hereunder. ***

"(4 1/2) It is understood and agreed that upon insurance written as herein provided by the party of the first part, the applications for which are procured from, or through a sub-agent, or insurance broker regularly engaged in the business of insurance, and in consequence thereof the party of the second part is obligated to pay a portion of his commission to such subagent or insurance broker, the rate of commission to be paid hereunder to the party of the second part for all such insurance shall be twenty-five per cent. (25%), provided the party of the second part shall, upon forwarding applications to the party of the first part, advise the party of the first part in writing of the name and address of and rate of commission to be paid to the subagent or insurance broker by the party of the second part."

The grounds of demurrer referred to in the opinion are as follows:

"(A) Said count fails to show a breach of the bond in this: That it fails to aver that the Employers' Indemnity Company sustained a pecuniary loss by an act or acts of larceny or embezzlement upon the part of A.T. De Bow in the performance of the duties of the office or position in the service of the Employers' Indemnity Company as such duties have been stated in writing by the employer to this defendant.

"(2) Said count refers to a writing which is not set out hæaec verba nor according to its legal effect.

"(3) Said count fails to show what duties the said A.T. De Bow was stated by plaintiff's predecessor in title to defendant was engaged to perform.

"(6) The count shows on its face that the entire contract is not set out nor pleaded according to its...