Merchants Ins. Co. v. Herber
| Decision Date | 07 June 1897 |
| Docket Number | Nos. 10,520 - (103).,s. 10,520 - (103). |
| Citation | 68 Minn. 420 |
| Parties | MERCHANTS INSURANCE COMPANY v. WILLIAM S. HERBER and Others.<SMALL><SUP>1</SUP></SMALL> |
| Court | Minnesota Supreme Court |
Wm. Ely Bramhall, for appellant.
John F. Byers, for respondent.
This is an action upon a bond given to the plaintiff by the defendants Herber, as principal, and Wright and another, as sureties. Verdict for the defendant Wright, who alone answered, and the plaintiff appealed from an order denying its motion for a new trial. At the close of the evidence the plaintiff requested the court to instruct the jury to return a verdict for the plaintiff for the amount claimed in the complaint. The request was refused, and plaintiff excepted. This ruling is assigned as error, and its correctness is practically the only question we find it necessary to discuss or determine on this appeal.
On April 21, 1893, the defendant Herber was appointed sole agent of the plaintiff for the city of Minneapolis. The appointment in fact took effect on May 1st following, at which time he took sole charge of the agency, with authority to write insurance and collect all premiums for the plaintiff. The bond in question was executed at the date of his appointment, and was conditioned for the faithful discharge of his duties as such agent, and particularly that he would comply with the instructions of the plaintiff, promptly collect all premiums, and remit the same to the plaintiff within the time required by such instructions. The instructions given to the agent directed that the premiums be collected on delivery of the policies, that is, the plaintiff would allow no credit, and, if any were given, it would be at the agent's own risk; that all accounts for the business of the previous month, with remittance to balance, must be made by the 15th of each month; and, further, that it must be distinctly understood that all money received for premiums was the property of the plaintiff. The agent was, however, allowed to retain 15 per cent. of the premiums for his commissions and certain stipulated charges.
The agency of Herber continued under this appointment to, and was terminated on, November 1, 1894, at which time he was indebted to the plaintiff on account of premiums for policies issued by him for plaintiff in the sum of $891.91, for the recovery of which this action was brought. That Herber is indebted to the plaintiff in this amount, there is no controversy. It is also admitted that he remitted to the plaintiff money from time to time, during the time he was sole agent, which in the aggregate exceeded the amount due to it from Herber on account of policies issued by him during the time covered by the bond in question.
The evidence is undisputed that, for some years next before Herber's appointment as sole agent, he was, with his then partner, Wilson, agent for the plaintiff at Minneapolis, and that he was at the time of such appointment indebted to the plaintiff on account of policies previously issued as follows: For the previous months of January and February, $1,227.07; and on May 1, 1893, he sent plaintiff a check for this amount, which was applied in payment of the indebtedness for those months. For March, $515.64, which was paid by Herber's check of June 19th. For April, $679.79, paid by like check August 11th. On September 28, 1893, Herber sent the plaintiff his check for $503.85, the exact amount of his indebtedness to it for the business for the month of May, and it was applied in payment of the account for that month. All subsequent payments to plaintiff were made by Herber by his checks, each of which corresponded exactly with the balance due for some previous month's business, and was applied by the plaintiff in payment of such month's business. In this manner all of his indebtedness to the plaintiff on account of the previous business of himself and Wilson, and his individual indebtedness, were paid, except for the last month of his agency, October, 1894. All payments were so applied by the agreement, express or implied, of plaintiff and Herber.
The plaintiff claims that the surety, Wright, is bound by such application of the payments, even if the money remitted, and so applied to the extinguishment of Herber's indebtedness which existed prior to the taking effect of his appointment as sole agent, was received by him in payment of premiums for the payment of which the surety was holden. The surety, on the other hand, claims that the creditor and his principal, as against him, could not apply money, collected by the principal for premiums due for policies issued by him under the appointment for which the bond was given, to the payment of such prior indebtedness, and that the money so applied was in fact money collected for such premiums. It is apparent that if the money remitted June 19 and August 11, 1893, were applied on Herber's indebtedness for premiums on policies issued after May 1, 1893, there would be no shortage in his account for the time covered by this bond; but, if the application of these payments made by the parties is binding on the surety, he is liable on the bond for the amount claimed. The bond in this case did not secure past defaults of the principal.
It is true, as a general proposition, that a surety cannot direct the application of payments made by his principal, and is bound by any application made by the principal and creditor, or either of them. Allen v. Jones, 8 Minn. 172 (202). This rule, as thus broadly stated, applies to cases only where the principal makes the payment from funds which are his own, and free from any equity in favor of the surety to have the money applied in payment of the debt for which he is liable. Hence, where the specific moneys paid to the creditor, and applied on a debt of a principal for which the surety is not held, are the very moneys for the collection and payment of which he is obligated to the creditor, he is not bound by such application, and is equitably entitled to have the moneys applied to the payment of the debt for which he is surety, unless the creditor can show that he has a superior equity to have them applied as they were applied. The adjudged cases are not harmonious on this proposition, but any attempt to here cite and analyze them would be unprofitable. Many of them which are apparently conflicting may be reconciled by observing the distinction between payments made from funds which were the absolute property of the principal, and those made from funds affected by an equity in favor of the surety. Upon principle, we hold that the proposition we have stated is correct.
There are some general statements made in the case of County v. Willard, 39 Minn. 125, 39 N. W. 71, cited and relied upon by the plaintiff, opposed to this conclusion. The case referred to was an action against the sureties on the bond of a county treasurer for his second term. The trial court found that the defalcation for the recovery of which the action was brought occurred during the principal's second term, and the question before this court on appeal was whether this finding was sustained by the evidence, and the court held that it was. It was undisputed that the principal, on surrendering the office at the end of his second term, did not account or pay over all funds then chargeable to him; and it was held that the sureties on the second term bond were prima facie responsible for the deficiency, and, further, that the burden was upon them, if they would exonerate themselves, to show that the deficiency occurred during the prior term, and that the fact that there was a deficiency during the...
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