National Surety Co. v. Murphy-Walker Co.

• Decision Date: 04 March 1915
• Docket Number: (No. 384.)
• Citation: 174 S.W. 997
• Parties: NATIONAL SURETY CO. v. MURPHY-WALKER CO.
• Court: Texas Court of Appeals

174 S.W. 997

NATIONAL SURETY CO. v. MURPHY-WALKER CO.

(No. 384.)

Court of Civil Appeals of Texas. El Paso.

March 4, 1915.

Rehearing Denied April 1, 1915.

Appeal from District Court, Presidio County; W. C. Douglas, Judge.

Action by the Murphy-Walker Company against the National Surety Company. Judgment for plaintiff, and defendant appeals. Affirmed.

Jones, Jones & Hardie, of El Paso, for appellant. H. H. Kilpatrick, of Marfa, and J. F. Woodson, of El Paso, for appellee.

WALTHALL, J.

This suit was brought by appellee, Murphy-Walker Company, against the appellant, National Surety Company, on a certain contract in writing, designated by various terms and expressions in the pleadings and briefs filed as "contract of insurance," "fidelity bond," "guaranty bond," but each designating that certain instrument given by appellant to appellee in the penal sum of $1,000 as indemnity against loss, which appellee, the employer of W. G. Lempert, might sustain by or through the personal dishonesty, amounting to larceny or embezzlement of said Lempert, in the performance of his duties in the position of cashier in the service of appellee, and which contract appellee alleged to be a policy of insurance. The appellee alleged a loss of $1,820.41, specifying the several items aggregating that sum, occurring within the time covered by the contract, alleged that said loss was covered by the terms of the contract, and prayed judgment for the sum of $1,820.41, as the damages sustained, and for interest and costs. The appellant presented general and special exceptions to the petition, and answered, denying that appellee had suffered any loss through dishonesty of Lempert, amounting to larceny or embezzlement; traversed each of the allegations in the petition, except those admitted, putting them in issue. The answer specially pleaded as defense to the action matters claimed to be conditions precedent in the nature of certain questions and answers, and which appellant alleges to be untrue, and other express conditions which appellant alleges to be express warranties and assurances, affirmative and promissory, and made for the purpose of inducing the execution of the contract, all of which appellant alleges appellee failed to comply with and carry out, and that in said matters, appellee had breached the terms of the contract, and that by reason of said breach, appellant was released from liability. Appellee filed a supplemental petition, admitting that the contract contained certain clauses pleaded by appellant, that it offered to comply with others pleaded, and denied that it willfully or knowingly made any false representations; denied that the provisions pleaded as warranties were in fact warranties. The issues presented in the pleadings will be stated as fully as it may be necessary to state them, under the assignments to which they apply. The case was tried before the court without a jury. The court filed its findings of fact and conclusions of law, and rendered its judgment for plaintiff (appellee) for $1,000. The appellant filed a motion for new trial, and, it being overruled, gave notice of and perfected an appeal to this court.

Preliminary to a discussion of any of the assignments of error, in view of some of the assignments, it might be well to determine whether the contract on which this suit is brought is a form or policy of insurance, and in any way covered or affected by the statutes of this state on the subject of insurance. The contract in this case was executed on the 11th day of February, A. D. 1911, and extended until noon on the 11th day of February, 1912, and by subsequent contract of January 13, 1912, extended until noon on the 11th day of February, 1913. The trial judge applied to the contract the provisions of the Revised Civil Statutes of this state of 1911, embraced in articles 4947, 4948, 4951, 4955, and 4741 (4). Appellant assumes, in many of its assignments and propositions discussed, and very earnestly contends in others that none of these articles of the statute should have been applied by the trial court. That the importance of the above article of the statute as applied to the issues both of fact and law in this case in connection with article 4955 may be readily seen, it will be necessary to quote them here:

"Art. 4955. All the provisions of the laws of this state applicable to the life, fire, marine, inland, lightning, or tornado insurance companies, shall, so far as the same are applicable, govern and apply to all companies transacting any other kind of insurance business in this state, so far as they are not in conflict with provisions of law made specially applicable thereto."

"Art. 4741. No policy of life insurance shall be issued or delivered in this state, or be issued by a life insurance company organized under the laws of this state, unless the same shall contain provisions substantially as follows [subdivision 4]. A provision that all statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties."

"Art. 4947. Any provision in any contract or policy of insurance issued or contracted for in this state, which provides that the answers or statements made in the application for such contract, or in the contract of insurance, if untrue or false, shall render the contract or policy void or voidable, shall be of no effect, and shall not constitute any defense to any suit brought upon such contract, unless it be shown upon the trial thereof that the matter or thing misrepresented was material to the risk or actually contributed to the contingency or event on which said policy became due and payable, and whether it was material and so contributed in any case shall be a question of fact to be determined by the court or jury trying such case."

"Art. 4948. In all suits brought upon insurance contracts or policies hereafter issued or contracted for in this state, no defense based upon misrepresentations made in the applications for, or in obtaining or securing the said contract, shall be valid, unless the defendant shall show on the trial that, within a reasonable time after discovering the falsity of the misrepresentations so made, it gave notice to the assured, if living, or, if dead, to the owners or beneficiaries of said contract, that it refused to be bound by the contract or policy; provided, that ninety days shall be a reasonable time; provided, also, that this article shall not be construed as to render available as a defense any immaterial misrepresentation, nor to in any wise modify or affect article 3096aa (4947)."

"Art. 4951. Every contract or policy of insurance issued or contracted for in this state shall be accompanied by a written, photographic or printed copy of the application for such insurance policy or contract, as well as a copy of all questions asked and answers given thereto. The provisions of the foregoing articles shall not apply to policies of life insurance in which there is a clause making such policy indisputable after two years or less, provided premiums are duly paid; provided, further, that no defense based upon misrepresentations made in the application for, or in obtaining or securing, any contract of insurance upon the life of any person being or residing in this state shall be valid or enforceable in any suit brought upon such contract two years or more after the date of its issuance, when premiums due on such contract for the said term of two years have been paid to, and received by, the company issuing such contract, without notice to the assured by the company so issuing such contract of its intention to rescind the same on account of misrepresentations so made, unless it shall be shown on the trial that such misrepresentation was material to the risk and intentionally made."

The application of the above-quoted articles of the Revised Statutes of 1911, to the contract sued on, depends upon the question: Is the contract sued on (a fidelity or guaranty bond) to be construed as one of insurance; and appellant also insists that the application of the above articles depends upon the constitutionality, or at least, upon the application to this case of article 4955; second, is article 4955, above quoted, void as being unconstitutional, or inapplicable to this kind of insurance, as claimed by appellant?

The obligation sued on is one of that class of contracts that have come before the courts in recent years having for its object the indemnity of the employer against loss due to dishonesty of the employé. They are compensated sureties, the contract entered into for a premium paid after the fullest investigation, based upon written representations relative to the extent of the risk, and by a company incorporated for the express purpose of furnishing guaranty bonds as a means of revenue to the corporation and its stockholders. There are in principle no facts which differentiate such contracts from guaranty insurance, and the same rules of construction must apply thereto as apply to other insurance contracts. People v. Rose, 174 Ill. 310, 51 N. E. 246, 44 L. R. A. 124; Briefs on Law of Insurance, Cooley, vol. 1, p. 8 (f); Remington v. Fidelity, etc., Co., 27 Wash. 429, 67 Pac. 989; Cowles v. United States, etc., Co., 32 Wash. 120, 72 Pac. 1032, 98 Am. St. Rep. 838; Frost in Law of Guaranty Insurance, § 2; 19 Cyc. 516; Title Guaranty & Surety Co. v. Bank of Fulton, 89 Ark. 471, 117 S. W. 537, 33 L. R. A. (N. S.) 676.

Article 4955, Revised Statutes 1911, was formerly section 55 of chapter 108, General Laws of Texas 1909, p. 192. The subject-matter of chapter 108, as expressed in its title was:

"An act to authorize the incorporation of life, accident and health insurance companies and defining same; and to authorize such companies to transact business in the state of Texas; to authorize other like companies incorporated under the laws of other states, territories and countries to transact business in this state; to...