National Surety Co. v. Julian

• Decision Date: 12 October 1933
• Docket Number: 6 Div. 241.
• Citation: 150 So. 474,227 Ala. 472
• Parties: NATIONAL SURETY CO. v. JULIAN.
• Court: Alabama Supreme Court

150 So. 474

227 Ala. 472

NATIONAL SURETY CO. v. JULIAN.

6 Div. 241.

Supreme Court of Alabama

October 12, 1933

Rehearing Denied Nov. 9, 1933.

Appeal from Circuit Court, Jefferson County; Romaine Boyd, Judge.

Action on an indemnity bond by Frank N. Julian, as receiver of Citizens' Life Insurance Company, against the National Surety Company. From a judgment for plaintiff, defendant appeals.

Affirmed.

In an action in which the claim for relief is based on allegations of fraud, great latitude should be allowed in the introduction of evidence disclosing the alleged fraud.

Pleas of defendant, demurrers to which were sustained, are as follows:

(5) "Defendant avers that the Citizens Life Insurance Company discovered on, to wit, the first day of June, 1929 evidence of a dishonest act on the part of employee, Joe F Little. Defendant further avers that according to the conditions contained in said bond, said bond terminated on the date of such discovery. Defendant further avers that neither the Citizens Life Insurance Company nor the plaintiff gave notice to the defendant of any claim under said bond until more than six (6) months after the date on which said bond terminated by reason of the discovery of the Citizens Life Insurance Company of a dishonest act on the part of the employee, Joe F. Little."

(18) "Defendant says that said bond was given by defendant to Citizens Life Insurance Company in reliance upon false and fraudulent representations of Citizens Life Insurance Company made in the written application for said bond, which said representation of a material fact made to the defendant in said application was false to the knowledge of the Citizens Life Insurance Company, and that said representation was relied on by the defendant, viz.: 'The employes of the employer to whom the bond applied for is applicable have, to the best of employer's knowledge and belief, while in the service of the employer, or otherwise, always performed their respective duties faithfully. There has never come to the notice or knowledge, of the employer any act, fact or information indicating, or tending to indicate, that any of the said employees are unreliable, deceitful, dishonest or unworthy of confidence. The habits of all of the said employees, to the best of employer's knowledge and belief, are good.' The defendant has paid into court for the use of the plaintiff $75.00, the total amount of the premium paid on said bond. Defendant avers that said misstatements and misrepresentations were made by said Citizens Life Insurance Company with intent to deceive defendant, and that defendant was thereby induced to execute said bond, and that said misrepresentations increased the risk of loss to defendant upon said bond."

(12e) "Defendant says that said bond was obtained by Citizens Life Insurance Company by means of a false and fraudulent representation made by said Citizens Life Insurance Company in its written application for said bond, which said false representation was made by said Citizens Life Insurance Company as to a material fact with knowledge of its falsity and with intent to deceive defendant, and defendant relying thereon, was induced thereby to execute said bond, and said false representation increased the risk of loss under said bond. Said false representation was, that there had never come to the notice or knowledge of the Citizens Life Insurance Company any act, fact or information indicating or tending to indicate that its employe, Joe F. Little, was unreliable, deceitful, dishonest or unworthy of confidence. Defendant avers that said Citizens Life Insurance Company did in fact have knowledge of acts and facts indicating or tending to indicate that the said Joe F. Little was unreliable, deceitful, dishonest or unworthy of confidence. The defendant has paid into court $75.00, the total amount of the premium paid on said bond."

Pleas 12f and 12g, are identical with plea 12e, with the exception that the name "J.

L. Moore" is substituted for the name "Joe F. Little" wherever it appears in plea 12f, and the name "Clyde V. Scott" is substituted for the name "Joe F. Little" wherever it appears in plea 12g.

(19) "Defendant says that the Citizens Life Insurance Company, in making application to the defendant for said bond, did knowingly and deliberately conceal from defendant the existence of material facts, which increased the risk of loss under said bond, viz., that the employes to whom the bond was to be applicable, or one or some of them, had prior to the time of making the said application been guilty of fraud, dishonesty, forgery, theft, or wrongful abstraction in the performance of the duties of his or their position with said company. Said facts were known to said Citizens Life Insurance Company at the time the application was made. The defendant has paid into court for the use of plaintiff the sum of $75.00, the amount of the premium on said bond.

"Defendant avers that said concealment and failure to disclose said facts were done by said Citizens Life Insurance Company with intent to deceive defendant, and that defendant was thereby induced to execute said bond, and that said misrepresentations increased the risk of loss to defendant upon said bond."

Cabaniss & Johnston, of Birmingham, for appellant.

Coleman, Spain, Stewart & Davies and Frank M. Young, all of Birmingham, and W. L. Bryan, of Atlanta, Ga., for appellee.

KNIGHT Justice.

Suit by Frank N. Julian, as receiver of the Citizens' Life Insurance Company, against the National Surety Company, to recover for losses alleged to have been sustained by the Citizens' Life Insurance Company through the fraud, dishonesty, forgery, theft, embezzlement, etc., of three named officers or employees of said company. It is made to appear from the pleadings that the appellant had, on the 12th day of March, 1929, executed to the named life insurance company a certain bond or contract whereby the appellant agreed to indemnify the insurance company against the loss of any money or other personal property through the "fraud, dishonesty, forgery, theft, embezzlement or wrongful abstraction" of any employee named in the schedule attached to the policy. In the attached schedule, Joe F. Little, president, J. L. Moore, general manager, and Clyde V. Scott, auditor, were named as the employees, who were covered by the bond.

As originally filed, the complaint contained four counts, and each was based upon the bond, though it was not set out in extenso in any of the original counts. Thereafter the plaintiff amended his complaint by adding or attaching thereto a copy of the bond and schedules sued on, and by adding counts 5, 6, 7, 9, and 10. Subsequently, the plaintiff withdrew each of the four original counts of the complaint, and the cause thereafter proceeded to trial upon the five added counts, and other pleading hereinafter to be mentioned.

We deem it essential to a proper understanding of the case that the pertinent provisions of the bond should be here set out, and we will therefore, at the expense of brevity, set forth those provisions of the contract over which a greater portion of the contention has arisen. They are:

"The National Surety Company (surety), for an agreed annual premium, hereby agrees to indemnify Citizens Life Insurance Company of Huntsville, Alabama (employer), against the loss of any money or other personal property, (including money or other personal property for which the employer is responsible), through the fraud, dishonesty, forgery, theft, embezzlement, or wrongful abstraction of any employee named in the schedule attached or added thereto by acceptance notice, in the performance of the duties of any position anywhere in the employer's service, committed alone or in connivance with others, while this bond is in force as to such employee.

"The foregoing agreement is subject to the following conditions:

"1. The term of this bond begins on the 8th day of March 1929 and continues in force until terminated or canceled as hereinafter provided. Unless each premium charged, actually be paid to the surety or its duly authorized agent within sixty (60) days after the same shall have become due and payable, this bond shall become void as to further liability, from the last anniversary of the date effective up to which the premium shall have been paid in full.

"2. Without prejudice to the rights of the employer as respects anything that may occur during the period this bond is in force, the surety may at any time cancel its further liability for any or all employees, effective thirty (30) days after receipt by the employer of written notice to such effect. The employer may cancel this bond as to further liability for any or all employees, by written notice to the surety, effective upon its receipt. In case of any termination of liability, the unearned part agreed upon of the premium paid shall be returned to the employer, except as to any employee causing loss hereunder. The check of the surety or its representative served on or sent by mail to the employer, shall be a sufficient tender of such unearned premium.

"3. In the event of the death of any employee during the term of this bond, or of the suspension, dismissal, or retirement of any employee from the service of the employer during said term; or upon any employee entering into partnership relations with the

employer, this bond shall thereupon terminate automatically as to such employee without any action on the part of the surety. The right to give notice of a claim hereunder shall cease at the end of six months after the termination, expiration, or cancellation of this bond as to any employee.

"4. Upon the discovery by the employer of any evidence of any dishonest act on the part of any...