Massachusetts Bonding & Ins. Co. v. Simonds-Shields-Lonsdale Grain Co.

• Decision Date: 04 April 1932
• Parties: MASSACHUSETTS BONDING AND INVESTMENT COMPANY, APPELLANT, v. SIMONDS-SHIELDS-LONSDALE GRAIN COMPANY, RESPONDENT
• Court: Kansas Court of Appeals

49 S.W.2d 645

226 Mo.App. 1071

MASSACHUSETTS BONDING AND INVESTMENT COMPANY, APPELLANT, v. SIMONDS-SHIELDS-LONSDALE GRAIN COMPANY, RESPONDENT

Court of Appeals of Missouri, Kansas City

April 4, 1932

Appeal from the Circuit Court of Jackson County.--Hon. Brown Harris Judge.

REVERSED AND REMANDED (with directions).

Reversed and remanded.

Harding Murphy & Tucker for appellant.

Morrison Nugent, Wylder & Berger for respondent.

OPINION

TRIMBLE, P. J.

Plaintiff, a Massachusetts corporation, authorized in Missouri to execute bonds as a surety for hire, brought this action in May, 1928, seeking to be discharged from liability arising thereafter as surety for defendant on a bond of $ 25,000 executed by defendant to the State of Missouri as a public warehouseman. The trial court rendered judgment for defendant, whereupon plaintiff appealed.

Defendant was and is the lessee and operator of a warehouse and grain elevator in Kansas City, known as the "Milwaukee Elevator" which it conducts as a public warehouse and elevator for the storage of grain. As such, and in accordance with the provision of what was originally Article 3, Chapter 117, Revised Statutes 1899, entitled "Inspection of Grain" and especially section 7627 thereof (which Article afterward became Article 2, Chapter 60, Revised Statutes 1909, and which section, as amended in Laws 1907, page 285, became section 6777 of said revision, and which Article later became Article 2 of Chapter 49, Revised Statutes 1919, and which last mentioned section, changed by Laws 1913, page 358, became section 6001 of said last named revision, and said Article now is Article 1 of Chapter 98, Revised Statutes 1929, and said last named section is now section 13329 of said revision), it furnished "Public Warehouseman's Bonds" executed to the State of Missouri, conditioned for the faithful performance of its duties as a public warehouseman, as security for any penalties found by due course of law for violation of any clause of the article and its unreserved compliance with the laws of the State in relation thereto, all in the total penal sum made applicable by the statutory section mentioned.

One of these bonds in the sum of $ 25,000 was executed by defendant as principal and appellant as surety on the 10th day of January, 1918, which was approved by the circuit court on February 2, 1918, and said bond was duly filed in accordance with the law.

At the time this bond was executed and filed, the rate of the annual premium was one-fourth of one per cent; and on $ 25,000 this rate would make the annual premium $ 62.50 and this was the annual premium paid. Sometime after 1919, but prior to 1926, the Towner Rating Bureau (which was a privately owned organization, the principal owner of which, Mr. Towner, was statistician for all surety companies and kept files of their experience and business which, after being "all posted together," average rates for the use of all companies based upon the average experience of all, were arrived at, decided upon and promulgated to all) fixed or announced a rate of one per cent. But at the beginning of 1926 the premium rate was fixed for all companies at $ 25 per 100,000 bushel capacity of elevator and, as defendant's elevator capacity was now 2,900,000 bushels, this made, at the last above named rate, the annual premium $ 181.25 instead of $ 62.50.

There is no contention over the correctness of this larger premium on all bonds written during and after 1926, but the contention is over the right of plaintiff to demand such increased rate when the contract between the parties was the rate at $ 62.50 per year, and also over whether plaintiff could rightfully seek to be released from furnishing further suretyship in the future at the old rate or, under the terms of the contract, can obtain release without cause.

The annual premium paying date was February 2, of each year, and shortly before this date in 1928, namely on January 10, 1928 Walsh, plaintiff's Resident Manager at Kansas City wrote to McCluer-Wilbur Underwriting Company (a firm of insurance brokers in Kansas City), saying--

"The present term of the above captioned bond will expire on the 2d day of February, 1928.

"Unless we hear from you with advices to the contrary submitting cancellation evidence, we will charge your account with the renewal premium of $ 62.50 to cover for the year beginning on the above date.

"We trust you will find this satisfactory."

The record does not disclose any written reply to this letter. But a notation appears on the margin thereof as follows: "1/25/28 notified Walsh (plaintiff's resident manager) to charge renewal." This alone and of itself is hearsay as to its truth; but Mr. Wilbur, witness for defendant, testified that he made the notation and that he did notify Walsh to charge such renewal; but he does not state how or in what words he so notified him, but merely that he "notified him." The evidence in the record, however, is that somewhere about January 25, or 28, 1928, Wilbur of the McCluer-Wilbur Underwriting Company, called plaintiff's resident manager Walsh over the 'phone and said that he (Wilbur) had an order from defendant to renew the bond, but the resident manager told him the rate was, or would be, one per cent instead of one-fourth of one per cent, to which Wilbur replied that such rate of one per cent did not apply. Whereupon the matter remained thus in dispute and unsettled until plaintiff's resident manager had opportunity to consult plaintiff from whom it was learned that the rate was not one per cent but was $ 25 on each 100,000 bushel capacity (which, as stated, would make the premium $ 181.25) and this was contended for in two telephone conversations had thereafter. In the meantime on February 2, 1928, according to Wilbur's testimony, the McCluer-Wilbur Underwriting Company made or rendered a bill to defendant for $ 62.50, the asserted premium due for the year beginning February 2, 1928, which defendant paid to McCluer-Wilbur Underwriting Company on February 3, 1928, but which plaintiff refused to accept, and said McCluer-Wilbur Underwriting Company still holds and retains but were willing at all times to pay to plaintiff but the latter would not accept. The record also shows that in a letter dated January 10, 1927, (possibly a misdate for 1928), the defendant wrote McCluer-Wilbur Underwriting Company that--

"In reply to your two favors of the 4th in reference to . . . $ 25,000 bond to the State of Missouri, covering the Milwaukee Elevator, we wish to continue these bonds for another year."

With matters in this shape, the plaintiff's resident manager, Walsh, wrote McCluer-Wilbur Underwriting Company on February 17, 1928, stating, in reference to the bond involved herein, that--

"This is to advise you we are charging your account with the renewal premium of $ 181.25 due February 2, 1928 under this bond.

"The delay in charging up this premium which is in a different amount to the rate charged heretofore was brought about on account of the negotiations concerning the proper rate. It finally has been definitely ruled by the Rating Bureau that the rate given in Bulletin 3740, September 3, 1926, must govern, which provides that the premium charge be made of $ 25 for each 100,000 bushels storage capacity of the elevator bonded. This particular elevator has a capacity of 2,900,000 bushels, so that the premium on a $ 100,000 bond would be $ 725.00 per annum, and not 1% on the bond penalty nor one-fourth of 1%.

"Under the above circumstances, you will note the correct premium for our bond of $ 25,000 is $ 181.25. If there is any question, please advise us at once.

"For your convenience in the event you do not have before you Bulletin 3740 which governs this rate, it reads as follows:

"'Where Grain Elevators are Bonded BOTH to the State of Missouri and to the Kansas City Board of Trade:

"'Charge for the Missouri Statutory Bond to the State, annual premium of $ 25 for each 100,000 bushels capacity of the bonded elevator.'"

To which McCluer-Wilbur Underwriting Company replied on February 18, 1928, saying that--

"We have your letter of the 17th and we are submitting a copy of your letter to our client. There is no question about the proper rate on this bond at this time. It should be $ 181.25 as stated in your letter; that is, however, for a bond applied for and executed at this date. We call the attention of your Company to the fact, however, that it contracted with Simonds-Shields-Lonsdale Grain Company to take this bond, which is continuous in form, at an initial premium of $ 62.50 and an annual premium thereafter of $ 62.50, payable on each anniversary date. This is the amount of premium stated in the application and no amendment or agreement has even been made by client to pay any different premium. The bond is not even subject to renewal certificate; it is continuous, and therefore the original agreement as to amount of the charge is still in effect and your Company could not legally collect any more premium than originally agreed upon.

"Your Company could of course institute proceedings in the circuit court to cancel the bond, provided our client did not agree to pay a higher rate. Are we to take it that this is the position your company takes? If your Company does not take that position, it is entirely justified in telling the Bureau that it has a contract at an agreed rate of premium which has been in effect over a period of years and that it intends to live up to its contract. I might say to you that I know of companies which have taken that position and stood by it. My opinion is entirely justified by the action of your Company during all the time this bond has been in effect. The rate on the bond was correct...