State ex rel. Duckett v. Pettee

• Decision Date: 16 December 1980
• Docket Number: No. 7930SC1147,7930SC1147
• Citation: 50 N.C.App. 119,273 S.E.2d 317
• Parties: STATE of North Carolina, ex rel. Sam J. DUCKETT, Guardian of Maude Johnson Duckett, Incompetent, v. Jack C. PETTEE; Aetna Casualty & Surety Company; Mastrom, Incorporated,t/d/b/a Professional Management and MI Professional Managements; J. B. Siler;the State of North Carolina; and The Hartford Accident & Indemnity Company.
• Court: North Carolina Court of Appeals

Page 317

273 S.E.2d 317

50 N.C.App. 119

STATE of North Carolina, ex rel. Sam J. DUCKETT, Guardian of Maude Johnson Duckett, Incompetent, v. Jack C. PETTEE; Aetna Casualty & Surety Company; Mastrom Incorporated,t/d/b/a Professional Management and MI Professional Managements; J. B. Siler;the State of North Carolina; and The Hartford Accident & Indemnity Company.

No. 7930SC1147.

Court of Appeals of North Carolina.

Dec. 16, 1980.

Roberts, Cogburn & Williams by Landon Roberts, Asheville, for defendant-appellant.

Roy H. Patton, Jr., Canton, and Long, McClure, Parker, Hunt & Trull by Robert B. Long, Jr., Asheville, for plaintiffs-appellees.

MORRIS, Chief Judge.

The first question raised by this appeal is whether the court erred in granting summary judgment against Aetna in the sum of $42,000 which is seven times the $6,000 face amount of the bond. Aetna contends that the bond was one continuing bond, regardless of the fact that annual renewal premiums were paid, and that Aetna's maximum liability over the entire term of the guardianship was $6,000. We are constrained to agree.

The bond which was executed by Pettee as guardian and the Aetna as surety was as follows:

KNOW ALL MEN BY THESE PRESENTS that we, Jack Pettee, Asheville, N. C., as Principal, and Aetna Casualty & Surety Company, as Surety, are held and firmly bound unto the State of North Carolina, in the sum of $6,000.00 Dollars to the payment whereof we bind ourselves and each of us, our heirs, executors and administrators, jointly and severally, firmly by these presents.

THE CONDITION OF THIS OBLIGATION IS SUCH that if the above bounden Principal, Jack Pettee, Guardian, of Maude Johnson Duckett shall in all things administer said estate according to law and faithfully execute the trust reposed in him as such and obey all lawful orders of the Clerk of the Superior Court or other Court touching the administration of the estate committed to him, then this obligation to be void; otherwise to remain in full force and effect.

The bond was dated 17 April 1968 and duly executed by the guardian and surety before the Clerk of Superior Court.

As was said in Henry v. Wall, 217 N.C. 365, 368, 8 S.E.2d 223, 224 (1940):

The principal and his surety are liable under a contract expressed in definite terms and their liability cannot be carried beyond the fair meaning of those terms.

Necessarily, the determination of the question of the limits of liability of Aetna must depend upon the language of the contract. 17 Couch on Insurance, 2d § 68.46 (2d ed. 1967).

We find nothing in the language of the bond before us which would indicate any intent that the bond be anything other than continuous. The condition is that if the principal, as Guardian of Maude Duckett, "shall in all things administer said estate according to law and faithfully execute the trust reposed in him as such and obey all lawful orders of the Clerk of the Superior Court or other Court touching the administration of the estate committed to him ", the obligation of the bond would be void. Clearly the bond went to the entire administration of the estate, not to a single year of the administration and would be void only upon the guardian's faithful administration of the estate. It is clear that the bond was to remain in force as long as Pettee remained guardian whether six months or six years.

We think this bond is identical in intended coverage to the one in Indemnity Co. v. Hood, 226 N.C. 706, 40 S.E.2d 198 (1946). There the bond provided for the payment of any loss, not exceeding $10,000, which the employer might sustain by reason of defalcation of the named employee "while in any position in the continuous employ of the Employer". The bond was kept in force by the payment of annual premiums. The Court, through Justice Barnhill, said:

The assumption of liability is not limited to one year or any other fixed term, to be extended or renewed upon the payment of a stipulated premium. Woodfin v. Ins. Co., 51 N.C. 558; Jacksonville v. Bryan, 196 N.C. 721, 147 S.E. 12.

It guarantees the payment of any loss, not exceeding $10,000, sustained by the bank through the dishonesty of Slayton at any time during his continuous service as cashier, "but before the Employer shall become aware of any default on the part of the Employee, and discovered before the expiration of three years from the termination of such employment or cancellation of this bond, whichever may first happen."

This language is clear and unambiguous. Plaintiff agreed to reimburse the bank for losses incurred during the life of the bond through the default of Slayton to the extent of $10,000. It must be presumed the parties intended what the language used clearly expresses, Kihlberg v. U.S., 97 U.S. 398, 24 L.Ed. 1106; 12 A.J. 752, and the contract must be construed to mean what on its face it purports to mean. Hinton v. Vinson, 180 N.C. 393, 104 S.E. 897; McCain v. Ins. Co., 190 N.C. 549, 130 S.E. 186; Wallace v. Bellamy, 199 N.C. 759, 155 S.E. 856; Jacksonville v. Bryan, supra; Thornton v. Barbour, 204 N.C. 583, 169 S.E. 153; Grocery Co. v. R. R., 215 N.C. 223, 1 S.E.2d 535; 12 A.J. 751.

226 N.C. at 710, 40 S.E.2d at 201.

Other comparable fact situation cases appear to be in accord with the position we take here. See annot., 7 A.L.R.2d 946 (1949); Montgomery Ward & Co. v. Fidelity & Deposit Co., 162 F.2d 264 (C.C.A. 7th Cir. 1947), (reh. den.) affirming as to this question, Montgomery Ward & Co. v. Fidelity & Deposit Co., 65 F.Supp. 611 (N.D.Ill.1946).

Plaintiff stressfully urges that the subsequent annual premiums paid were for additional bond coverage each year. The position of North Carolina on this question is set out by Justice Huskins in Town of Scotland Neck v. Western Surety Company, N.C., 271 S.E.2d 501 (1980):

Where a bond is for an indefinite period running from a given date, annual premiums do not create a series of yearly contracts. Scranton Volunteer Fire Co. v. United States Fidelity & Guaranty Co., 450 F.2d 775 (2d Cir. 1971); Columbia Hospital v. United States Fidelity & Guaranty Co., 188 F.2d 654 (D.C. Cir. 1951); Brulatour v. Aetna Casualty and Surety Co., 80 F.2d 834 (2d Cir. 1936). Paying annual premiums has no greater effect than to continue the existing contract. "By the general rule, a contract of fidelity guaranty insurance, although it may run indefinitely, runs for but a year at a time, and will not continue unless the premiums are paid. There is authority, however, that under a contract of fidelity guaranty insurance, by which, in consideration of an initial premium and subsequent annual ones, the insurer undertakes to indemnify the insured against loss, and which contains no provision for forfeiture or termination upon nonpayment, the payment of the annual premium is to be enforced as part of the consideration and not as a condition, and the obligation of the contract is therefore continuous and single, and a new assent or affirmative action is not necessary to keep it in force, even on a failure to...