Whinfield v. Mass. Bonding & Ins. Co.

• Decision Date: 26 October 1915
• Docket Number: No. 3.,3.
• Citation: Whinfield v. Mass. Bonding & Ins. Co., 162 Wis. 1, 154 N.W. 632 (Wis. 1915)
• Court: Wisconsin Supreme Court
• Parties: WHINFIELD v. MASSACHUSETTS BONDING & INS. CO.

162 Wis. 1

154 N.W. 632

WHINFIELD

v.MASSACHUSETTS BONDING & INS. CO.

No. 3.

Supreme Court of Wisconsin.

Oct. 26, 1915.

Winslow, C. J., and Barnes and Timlin, JJ., dissenting.

Appeal from Circuit Court, Fond du Lac County; Chester A. Fowler, Judge.

Action by Eleanor B. Whinfield against the Massachusetts Bonding & Insurance Company. From a judgment for plaintiff, defendant appeals. Affirmed.

The plaintiff is the executrix and the beneficiary of a large estate left by her deceased husband. On November 20, 1909, she appointed N. W. Sallade to act for her as attorney in fact to manage for her the personal property located in Wisconsin and which had come to his possession from her deceased husband, giving him full power to deposit and invest it for her and reinvest it whenever required, and to execute, hold, and deliver all necessary papers and do every act in her place and stead in regard thereto. Mr. Sallade received into his possession personalproperty of the plaintiff amounting to about $150,000, consisting largely of moneys, notes, mortgages, and other securities. While acting as plaintiff's attorney in fact in this matter, Mr. Sallade was the treasurer of the diocese of Fond du Lac, handling its funds and securities, and active manager of the Fond du Lac Church Furniture Company.

Mr. Sallade made monthly statements in writing to plaintiff of his accounts as her attorney in fact. During the summer of 1910 the plaintiff, by letter, suggested to Sallade the propriety of furnishing her a fidelity bond. In September, 1910, when plaintiff returned to Fond du Lac after an absence from the state from the time she appointed him, he furnished her a list of the securities which he stated were her property, and that they were deposited in a safety deposit box at the Fond du Lac National Bank. Plaintiff and Sallade went to the bank, took the securities from the safety deposit box, and compared and checked them with the monthly statement he had recently furnished her, and the securities produced from the box agreed with this monthly statement of his account. Some of these securities kept in the deposit box, which he represented as having been purchased for her and which appeared in his monthly reports, were, in fact, the property of the diocese of Fond du Lac. The plaintiff, in fact, believed they were securities he had acquired and held for her. Sallade had in his possession a private account in the form of a loose leaf memorandum book. The trial court found as facts concerning it:

“That said Sallade also kept in his desk, at the Church Furniture Company's office, certain loose leaf memoranda, not bound or fastened in any book, but merely tied together with thumb fasteners, the several sheets whereof were headed ‘F. D. L. Furn. Co.,’ except one headed ‘N. W. Sallade and M. O. Pillsbury,’ which indicated the sums taken from the plaintiff and by Sallade converted to the use of the Church Furniture Company, but said leaves had no notation thereon indicating that they referred in any way to the plaintiff's estate, and the plaintiff had no knowledge of the existence of said leaves or of the facts shown thereby.”

On November 19, 1910, Sallade made application in writing to defendant for a surety bond. The defendant requested an “employer's statement” from plaintiff, and she, on December 22, 1910, made and signed such a statement, and attached thereto the list of securities which Sallade had furnished and checked with her in September, 1910. The application recites that her answers to the propounded printed questions of the statement were “to be taken as conditions precedent and as the basis for the said bond applied for. * * *” By question 12 plaintiff answered that the means used to ascertain the correctness of Sallade's accounts was “a personal examination,” and that they would be examined “yearly.” The application also contains these questions and answers:

“13. When were his accounts last examined? Answer: Last of September in 1910. Amount of securities, $159,831.61, as per list examined and checked at that time, a copy of which is hereto attached.

14. Were they at that time in every respect correct and proper securities and funds on hand to balance? Yes.

15. Is there now, or has there been, any shortage due you by applicant? No.

16. (a) Is he now indebted to you? No. (b) If so, state amount and nature of indebtedness. No.

17. Have you any reason to know of or suspect any previous defalcation or shortage by the applicant or any circumstances tending to indicate that he is not a proper person to bond? If so, give particulars. Answer: No.”

The trial court found, and the evidence sustains, the conclusion of fact:

“That the defendant, in executing said bond, did not rely on the statement of the plaintiff, contained in said employer's statement, as to the securities in the hands of Sallade owned by her, but required the said list to be submitted to its local agent at Fond du Lac, and required such agent to examine the securities referred to in said list and compare them with the descriptions therein, to assure itself that they were, in fact, in Sallade's possession at the time the bond went into effect; that said local agent did cursorily examine the identical securities described in said list, and all of them, which were produced and exhibited by Sallade to him; that none of said securities ran to, or had upon or with them assignments running to, the plaintiff or the said estate, nor did assignments thereof exist; that the said local agent did not call for any evidence of title to said securities, but relied on the oral representations of Sallade, made at the time he examined the same, that they belonged to the plaintiff, and were held by him for her.”

After the examination of the securities by defendant's local agent at Fond du Lac, and upon entering into an arrangement with Sallade for a joint control with Sallade over the safety deposit box containing the mortgages he held as securities for her, the defendant, on January 10, 1911, delivered to plaintiff, upon payment of $175 to it as premium, its bond of indemnity against loss through larceny or embezzlement by Sallade as attorney in fact of the plaintiff. This bond covered the period of one year from January 10, 1911. Sallade died in August, 1911.

It appears that $14,119.41 of plaintiff's money was embezzled by Sallade after the bond was given and while it was in force. There is no dispute of the claim that Sallade had, in fact, dishonestly appropriated and embezzled a considerable amount of plaintiff's property before September, 1910, and that the lists of her securities he had made were false, and included therein securities which did not belong to her estate, and a part of the securities he exhibited to her in September, 1910, and to defendant's agent before the issuance of the bond, as her property were the property of the diocese of Fond du Lac.

The bond contains the provision that:

“Upon the faith of said statement [employer's statement], * * * which employer hereby warrants to be true, it is hereby agreed and declared that, subject to the provisions and conditions herein contained, which shall be conditions precedent to the right on the part of the employer to recover under this bond. * * * If the employer's written statement, hereinbefore referred to, shall be found in any respect untrue, this bond shall be void.”

“This bond is issued on the express understanding that the employé has not within the knowledge of the employer at any former period been a defaulter. * * *”

The trial court held that the bond is a binding obligation, and that there were no breaches thereof on the part of the plaintiff on account of any misstatements of fact in her written statement upon which the bond issued and which was made a part thereof.

This is an appeal from a judgment awarding plaintiff recovery against defendant for the amount of Sallade's defalcation to her during the time the bond was in force.

T. L. Doyle, of Fond du Lac, and Quarles, Spence & Quarles, of Milwaukee (Irving A. Fish, of Milwaukee, of counsel), for appellant.

Thompson, Thompson & Jackson and Thompson, Thompson, Allen & Gruenewald, all of Oshkosh, for respondent.

SIEBECKER, J. (after stating the facts as above).

The circuit court awarded recovery on the bond upon the ground that it was a binding contract made by the parties; that its conditions and stipulations had not been breached by the plaintiff; and that plaintiff was entitled to be indemnified for the losses she sustained on account of Sallade's defalcations during the period of time it was in force.

[1][2] It is the contention of the defendant that it is not liable, because the bond recites that the “employer's statement” in her written application for the bond is a part thereof; that the bond was issued in consideration of the premium paid and “upon the faith of the said statements as aforesaid, by the employer, which employer hereby warrants to be true”; and that, if these written statements of the plaintiff “shall be found in any respect untrue, this bond shall be void.” The question resolves itself to the proposition: Were the answers in the written statement, to the effect that Sallade's accounts were last examined by her personally the “last of September in 1910; amount of securities,...