N. Assur. Co. of England v. Borgelt

• Citation: 67 Neb. 282,93 N.W. 226
• Parties: NORTHERN ASSUR. CO. OF ENGLAND v. BORGELT ET AL.
• Decision Date: 21 January 1903
• Court: Nebraska Supreme Court

67 Neb. 282

93 N.W. 226

NORTHERN ASSUR. CO. OF ENGLAND

v.BORGELT ET AL.^a1

Supreme Court of Nebraska.

Jan. 21, 1903.

Syllabus by the Court.

1. Where the record discloses affirmatively that the plaintiff, a foreign corporation, has been doing business in this state without complying with the conditions prescribed by the statutes, a demurrer is properly sustained.

2. But where such fact does not appear affirmatively, a demurrer will not lie because the petition fails to allege that the statutory conditions have been complied with. In such cases noncompliance is a defense to be set up by answer. Insurance Co. v. Hayden, 83 N. W. 922, 60 Neb. 636, 83 Am. St. Rep. 545, distinguished.

3. A cause of action accrues upon a bond conditioned to do a certain act as soon as there is a default in the performance, whether the obligee has suffered damage or not, and the statute of limitations begins to run from that date.

4. If, however, the bond is conditioned to indemnify, damage must be shown before the party indemnified is entitled to recover, so that a cause of action accrues, and the statute begins to run, not from the date of the act which causes damage, but from the time when pecuniary loss ensues therefrom.

5. Courts incline strongly to construe bonds as contracts of indemnity only, and will attach more importance to the general purpose of a bond, as shown by its provisions as a whole, and the interests of the parties in the subject-matter, than to the precise form of words employed.

6. Although a cause of action for a prior breach of a bond furnished by an agent for the protection of his principal may have been barred by limitation, such fact will not bar an action for another and subsequent breach. The statute of limitations runs as to each breach from the time when it takes place.

7. It is the duty of an agent of limited authority to adhere faithfully to the instructions of his principal, and if he exceeds, violates, or neglects them, and loss results to his principal as a natural and ordinary consequence, it is his duty to make such loss good.

8. A bond furnished by insurance agents to the company was conditioned that the agents should “in all respects observe and fulfill the instructions of the said company,” and that they should “in all other respects well and faithfully perform their duties as such agents.” The agents neglected to cancel a policy when directed so to do, and the company was afterwards compelled to pay a loss upon the policy. In an action on the bond, held (1) that, as to the condition last mentioned, the bond was to be construed as a contract of indemnity; (2) that, even if not a contract of indemnity, as it was the duty of the agents to make good any loss which accrued to the company through their neglect or violation of their instructions, the condition that they would fully perform their duties as agents was broken when they failed to repay to the company the amount it was compelled to pay out through their misconduct, and hence, in either view, the cause of action was not barred until five years from the time when loss to the obligee ensued.

Commissioners' opinion. Department No. 2. Error to district court, Lancaster county; Frost, Judge.

Action by the Northern Assurance Company of England against August D. Borgelt and others. Judgment for defendants, and plaintiff brings error. Reversed.Greene, Breckenridge & Kinsler, for plaintiff in error.

F. A. Boehmer, for defendants in error.

POUND, C.

A firm of insurance agents furnished a bond to one of the companies which they represented, conditioned, among other things, that the agents should “in all respects observe and fulfill the instructions of the said company,” and that they should “in all other respects well and faithfully perform their duties as such agents.” The agents, it is alleged, neglected to cancel a policy when directed so to do, and the company was afterwards compelled to pay a loss upon the policy. Thereupon the company brought an action upon the bond, alleging these facts. It appeared from the petition that the neglect to comply with the order to cancel the policy took place more than five years prior to the time when the cause was begun, but the action was brought within five years from the time when it was ascertained that the company was liable for a loss under the policy, and was compelled to pay such loss. Demurrers were sustained in the district court, and the company brings the case here on error.

Two points are made in support of the demurrer,--that the plaintiff, as appears on the face of the petition, is a foreign insurance company, and does not allege that it has complied with the statutory prerequisites to transaction of business in this state, and that the cause of action is barred by the statute of limitations. In support of the first point, we are cited to Insurance Co. v. Hayden, 60 Neb. 636, 83 N. W. 922, 83 Am. St. Rep. 545. But we think a manifest distinction is to be made between the two cases. Where the record discloses affirmatively that a plaintiff, a foreign insurance company, has been doing business in this state without complying with the conditions prescribed by the statutes, a demurrer is proper. Insurance Co. v. Hayden was such a case. We have examined the record in that cause, and find the petition alleged that the plaintiff had made contracts in Massachusetts, to be governed by the laws of that state, insuring property in Nebraska, and that copies of the policies were filed and inserted in the record. From the pleadings and instruments filed it appeared affirmatively that the transactions involved were in violation of the statutes of this state. In the case at bar this is not true. There is an omission to allege that the statutory conditions had been observed, but there is nothing to show affirmatively that they were not in fact fully satisfied. The petition shows that the company had been doing business in the state in the ordinary manner by regular resident agents. The question is whether we shall presume that it was doing so unlawfully. On this point the authorities are numerous and uniform. Where it does not appear affirmatively that the plaintiff has done business in the state in contravention of the statutes, a demurrer will not lie because the petition fails to allege that the statutory conditions have been complied with. In such cases noncompliance is a defense to be set up by answer. Smith v. Sewing Mach. Co., 26 Ohio St. 562;Insurance Co. v. Robinson, 25 Ind. 536;Sprague v. Lumber Co., 106 Ind. 242, 6 N. E. 335;Nickels v. Association, 93 Va. 380, 25 S. E. 8;Nelms v. Mortgage Co., 92 Ala. 157, 9 South. 141;Sewing Mach. Co. v. Moore, 2 Dak. 280, 8 N. W. 131;Security Co. v. Vader (C. C.) 28 Fed. 265. In Cassaday v. Insurance Co., 72 Ind. 95, the court said: “Where the complaint is silent on the subject, it cannot be presumed that the appellee and its agent had not complied with the provisions of the statute at the time of the execution of the contract. In the absence of any showing to the contrary, it seems to us that we may fairly presume that both the appellee and its solicitor had complied with the requirements of the statute before and at the time the policy was issued, and the note in suit was given therefor. At all events, we are of the opinion that the complaint ought not to be held insufficient on a mere presumption that the appellee and its agents may not have complied with the provisions of the statute.” Counsel cite several cases where noncompliance with the statute was held a good defense. But those cases accord with the rule as above stated.

In order to determine whether...