John Church Co. v. Aetna Indem. Co.

• Decision Date: 01 January 1914
• Docket Number: 1827,1828.
• Citation: 80 S.E. 1093,13 Ga.App. 826
• Parties: JOHN CHURCH CO. v. ÆTNA INDEMNITY CO. ÆTNA INDEMNITY CO. v. JOHN CHURCH CO.
• Court: Georgia Court of Appeals

80 S.E. 1093

13 Ga.App. 826

JOHN CHURCH CO. v. ÆTNA INDEMNITY CO.

ÆTNA INDEMNITY CO. v. JOHN CHURCH CO.

Nos. 1827, 1828.

Court of Appeals of Georgia

January 01, 1914

Syllabus by the Court.

A surety is one who becomes responsible for the debt, default or miscarriage of another; the principal remaining bound therefor. A contract of suretyship differs from a guaranty in that the consideration of the latter is a benefit flowing to the guarantor. Civ. Code 1910, § 3538. By a contract of fidelity insurance, a fidelity insurance company insures against loss caused by the default, neglect, or dishonesty of a trustee, officer, agent, or other employé, or such other person as may be required to give bond, or guarantees the performance of such bonds, as individuals do who sign the bonds of such persons as sureties. Civ. Code 1910, § 2550.

In an action based upon a contract, the rights of both parties are to be determined by the contract, and the contract is to be so construed as to give effect to the manifest intention of the parties. Even though the contract in the present case be held to be one of fidelity insurance, still the rule that of two constructions the one favorable to the insured must be adopted cannot be availed of to refine away the terms of a contract expressed with sufficient clearness to convey the plain meaning of the parties. While the general purpose of a contract of fidelity insurance is full indemnity, the contract here involved plainly is confined to the faithfulness of the principal in the bond in his discharge of a certain defined duty, without regard to the period of time necessary for its performance. The amount of liability is equally plainly limited. Furthermore, the receipts for premiums clearly evidence that the premium was accepted merely as payment for a continuance of the same limited liability, and not as compensation for a yearly cumulative liability of a like amount.

When a bond guaranteeing the fidelity of an employé as to a specific duty, and not issued for a definite term, is renewed by the payment of a premium to "continue in force" the contract, there is still only one contract and one penalty and receipts for premiums in renewal serve only to extend to a new period of time the indemnity provided by the original bond.

Inasmuch as the plaintiff refused to amend as required by the judgment on the demurrer, the court did not err in dismissing the petition.

Error from City Court of Savannah; Davis Freeman, Judge.

Action by the John Church Company against the Ætna Indemnity Company. From a judgment of dismissal, plaintiff brings error, and defendant files a cross-bill of exceptions. Affirmed on main bill, and cross-bill dismissed.

Wm. B Stephens and Adams & Adams, all of Savannah, for plaintiff in error.

Dodd & Dodd, of Atlanta, Osborne & Lawrence, of Savannah, and Alex. Akerman, of Macon, for defendant in error.

RUSSELL J.

The John Church Company filed a petition against the Ætna Indemnity Company to recover $7,785.55, alleged to be the liability of the defendant company upon one bond and two renewals thereof. It alleged that the liability assumed by the Ætna Indemnity Company on the original bond was $3,000 and that this liability was for any moneys misappropriated by J. P. Holmes during the period covered by the original bond, to wit, from September 24, 1904, to September 24, 1905, and that the indemnity company assumed a like liability for any misappropriations by Holmes upon the two renewals of the original bond; one extending from September 24, 1905, to September 24, 1906, and the other from September 24, 1906, to September 24, 1907. The bond itself was as follows: "Know all men by these presents that we, J. P. Holmes, as principal and the Ætna Indemnity Company of Hartford, Conn., surety, are held and firmly bound unto the John Church Company in the sum of three thousand dollars, lawful money of the United States, to be paid to the said John Church Company of Cincinnati, Ohio, for which payment, well and truly to be made, we bind ourselves, our heirs, executors, and administrators, jointly and severally, by these presents. Signed and sealed this 24th day of September, A. D. 1904. The condition of this obligation is such that whereas, the above-named J. P. Holmes was, on the 11th day of August, A. D. 1904, appointed trustee in a case of bankruptcy in the District Court of the United States for the Southern District of Georgia, wherein McArthur Sons Company, a corporation, was bankrupt; and whereas, the said J. P. Holmes has entered into a contract with the above-named John Church Company, under a decree of the United States court, to collect deferred payments on certain collateral owned and controlled by the said John Church Company: Now, therefore, if the said J. P. Holmes, trustee as aforesaid, shall faithfully and truly account for all the moneys and assets which shall come into his hands and possession on the collection of the deferred payments on said contracts referred to in the said decree in the United States court, dated September 19, 1904, and shall faithfully perform his duties in regard to the collection of said collateral, then this obligation to be void, otherwise to remain in full force and virtue." The two receipts are identical except as to date, and as to the particular term for which the bond is said to be renewed or continued in force; one receipt being dated September 22, 1905, and the other September 24, 1906. The language employed in these receipts is as follows: "Received of J. P. Holmes, trustee, thirty dollars ($30), being renewal premium on the bond in the Ætna Indemnity Company, for the amount of three thousand dollars ($3,000), bonding him to the John Church Company of Cincinnati, Ohio, as trustee in bankruptcy of McArthur & Sons Co., bankrupts; said bond being hereby renewed and continued in force for the term of one year, to wit, from September 24, 1905, to September 24, 1906."

The controlling issue between the plaintiff and the defendant is whether the indemnity company, under the allegations of the petition and the exhibits attached thereto, is liable for the sum of $7,785.55, and interest thereon, or only liable to the extent of $3,000. We think the lower court correctly held that the liability of the defendant company is limited, by the terms of the contract upon which the plaintiff predicates its action, to an amount not to exceed $3,000. The petition alleges that the contract was entered into in pursuance of a decree granted in the District Court of the United States for the Eastern Division of the Southern District of Georgia, adjudging that certain properties, contracts, and notes, amounting to the principal sum of $30,645.59, were lawfully held by the John Church Company, as security for the indebtedness due them by McArthur & Sons Company, bankrupt, and directing J. P. Holmes, as trustee of the said bankrupt estate, to collect such sums as were due, and as became due, and that 90 per cent. of the collections be paid over weekly, as collected, to counsel for the John Church Company. For the protection of the John Church Company, Holmes, as trustee, was by the decree required to furnish bond, with good and sufficient security, payable to the John Church Company, in the sum of $3,000, conditioned for the faithful performance of all his duties under the decree, and to properly account for all moneys collected, as and when therein provided. The plaintiff's theory, as contended for by its counsel, is that the original bond was made for the purpose of indemnifying it only for the year beginning September 24, 1904, and that the two receipts renewed the obligation for a like amount from September, 1905, to September, 1906, and from September, 1906, to September, 1907; and much stress is laid by learned counsel upon the use of the word "renewal" in the receipt signed by the agents of the indemnity company. We can very well agree to the definitions of the words "renew" and "renewal," as given by the authorities cited by learned counsel in his brief in the present case; but the use of the words "and continued in force," which immediately follow the word "renewed" in the receipts upon which the plaintiff relies, is of more than ordinary significance. Another fact of some significance is that, although Holmes is the principal in the bond, he is not joined in the suit. If the renewal receipts increased the amount of the indemnity company's liability, instead of merely extending the time for which that liability was to continue, then it would seem that Holmes should be joined in the suit with the indemnity company, for the reason that the liability of the indemnity company, as surety upon the bond, could not be greater than that of the principal, Holmes; and yet, should we construe the renewal receipts as equivalent to the execution of a new bond, Holmes has not obligated himself in any way other than by signing the original bond. Certainly he could not be sued upon the receipts for the premium, and it would seem that, if he cannot be sued, the indemnity company cannot be sued.

The plaintiff alleged that the defendant was liable to it for $2,864.75 upon the bond, $3,000 upon the first premium receipt, and $1,920.80 upon the second premium receipt making the total of $7,785.55, as aforesaid. The defendant, in its demurrer, challenged the petition on the grounds, among others, that the action was upon a bond by the terms of which the defendant's liability was limited to $3,000, while the plaintiff sought a recovery of more than twice that amount. The demurrer further challenged the right of the plaintiff to recover $500 expenses, alleged to have been incurred by plaintiff in auditing the accounts of Holmes. The court sustained these grounds of the d...