Perpetual Bldg. & Loan Ass'n v. United States Fidelity & Guarantee Co.
| Decision Date | 18 December 1902 |
| Citation | 92 N.W. 686,118 Iowa 729 |
| Parties | THE PERPETUAL BUILDING & LOAN ASSOCIATION v. UNITED STATES FIDELITY & GUARANTEE COMPANY, Appellant |
| Court | Iowa Supreme Court |
Appeal from Black Hawk District Court.--HON. A. S. BLAIR, Judge.
ACTION on a bond executed by defendant as surety of A. I Breckenridge as secretary of a building and loan association. Judgment against defendant, and it appeals.
Affirmed.
Edwards & Longley for appellant.
Courtright & Arbuckle for appellee.
One Breckenridge was elected secretary of the plaintiff, a building and loan association, and, in compliance with statute, furnished a bond in the sum of $ 4,000, with the defendant as surety, covering one year from February, 1899. At the request of defendant's agent, the president of the association, J. M. Groat, signed the following "employer's certificate" with "president" annexed: The defendant pleaded that this statement was intentionally false, and now takes exception to certain rulings bearing on such defense. Groat, when on the stand, was asked whether he knew, prior to January 1, 1899, that the secretary had failed to make to the directors of the association his semi-annual report in July previous, and was not permitted to answer. At that time there was no evidence that it was the duty of the secretary to make such a report, and therefore the ruling was correct.
One of the directors--Krapfel--was asked to give the substance of another director's remarks as to Breckenridge's habits in requesting him to be a member of the auditing committee. An objection was sustained in so "far as the word 'habits' is concerned." The kind of habits referred to was not disclosed. If good habits were intended, knowledge of these could not affect the risk except favorably. Many bad habits have no connection with business integrity. There is nothing, then, to indicate the inquiry was material to any issue. Appellant argues that his question had reference to habits of intoxication. If so, the court was not advised thereof. The ruling was correct.
II. It appears that the auditing committee of the association, on January 25, 1899, reported the secretary's accounts correct, and that the president's certificate was based thereon. Inquiry on the trial developed the fact that this committee found that the debits to loans on stock was $ 121.67 greater than the credits. The secretary's attention was directed to this, and he explained it was evidently a mistake; that possibly a note had been mislaid, and that he would look it up. He offered to make it good by giving his wife's check for the amount, and did so. This was left with the member of the committee, to be held subject to discovering the error. It was subsequently paid. The evidence shows conclusively that the committee supposed the discrepancy the result of a clerical error or an oversight, and that, when corrected, they acted in entire good faith. The president knew nothing of it, and hence could not have entertained a fraudulent intent in executing the certificate. That question, however, was submitted to the jury, and so answered. But appellant insists that, if the account was incorrect in fact, this renders the bond void. That the failure of the warranty of a material fact, or one made material by the terms of a contract or the representation thereof when construed as equivalent to a warranty, if acted upon in issuing a contract of insurance, will defeat recovery thereon, seems to be well settled. Glade v. Insurance Co., 56 Iowa 400, 9 N.W. 320; Hunter v. Cure Co., 96 Iowa 573, 65 N.W. 828; Ring v. Assurance Co. 145 Mass. 426, 14 N.E. 525; Nelson v. Insurance Co., 110 Iowa 600, 81 N.W. 807; Association v. Lauderdale 94 Tenn. 635 (30 S.W. 732.) And, if this defense were sufficient, it is not material that bad intent also was pleaded. Section 3639, Code.
But a careful reading of the certificate leads to the conclusion that Groat had the right to understand all his statements were on knowledge and belief only. True, the assertion that "his accounts were found in every respect correct, " standing alone, purports to state a fact; but in every other sentence of the certificate, and even in this following the semicolon, is a limitation to a present knowledge. The defendant, in alleging the statement to have been with evil intent, so interpreted the certificate, and it ought not to complain if its interpretation is accepted and the court's action in instructing the jury accordingly approved.
Appellant argues that the president spoke for the association, and, as the auditing committee knew, he, in acting for the association, must be held to have had knowledge. Reliance is placed on decisions to the effect that a corporation, in ratifying an unauthorized contract by its president, must take it cum onere; that is, it cannot insist on the contract right, and repudiate that unauthorized representation of the agent which to some extent constituted inducement to the other party. Balfour v. Irrigation Co. 123 Cal. 395, 55 P. 1062; Eadie v. Ashbaugh, 44 Iowa 519; Cassady v. Insurance Co., 109 Iowa 559; Fleishman v. VerDoes, 111 Iowa 322, 82 N.W. 757. The ready answer is that the certificate does not purport to be a statement of other than the president, and then only to the best of his knowledge and belief. He pretended to speak for no one but himself. Making the certificate was not within his duties as president, and the association is bound only in so far as the contract is based upon his individual assertions. As these were referred to in the bond, it was doubtless accepted subject to them. See Surety Co. v. Pauly, 170 U.S. 133 (18 S.Ct. 552, 42 L.Ed. 977).
III. The burden of proof was on the defendant on all issues except that of the giving immediate notice to defendant upon discovery of the defalcation. On that the defendant assumed the burden of proof in order to obtain the right to open and close. On what theory it was allowed this option we are not advised. As plaintiff has not appealed, the propriety of allowing it cannot be considered. We may remark, however, parenthetically, that possibly one party may have as good right to retain the burden in order to open and close as the other to elect to assume it in order to acquire something the law has not conferred. The court, after stating the issues fully, in the first instruction told the jury that the burden was on the defendant to establish "every material allegation in its answer and amendment thereto in order to defeat plaintiff's right of recovery herein." This was technically erroneous in requiring more than one defense to be established. But it purported merely to state upon whom was the burden of proof, and was immediately followed by instructions relating to the preponderance and weight of evidence, the credibility of the witnesses, and the general principles of law governing the case. The defenses were then separately stated, and the jury instructed, as to each, if established, plaintiff could not recover. Surely, the general statement as to burden of proof in the first paragraph could not have misled the jury into supposing more was required than specifically stated as essential in considering the several defenses to justify a verdict for defendant.
IV. The bond provides: ...
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