Springfield Fire Marine Ins. Co. v. Douglas

RILEY, J. There is involved here the question of liability of Oles I. Clouse, surety on the insurance agency bond of Tom Douglas. The plaintiff in error, hereinafter designated the insurance company, secured a judgment below in the sum of $367.60, interest, attorney fees, and costs, based on an instructed verdict against Tom Douglas, principal on the bond forming the basis of this action. *126 A judgment based on an instructed verdict was rendered favorable to Oles I. Clouse, surety on tbe insurance agency bond of Tom Douglas. From tbe latter judgment tbe insurance company appeals. Tbe liability of tbe principal, Tom Douglas, bas become final and a verity. Tbe general rule is that a surety is liable for a like amount and to tbe same extent as tbe principal, unless tbe obligee violates some provision of tbe bond or commits some act whereby the surety’s rights are prejudiced. Clouse contended as a defense that it was tbe duty of the insurance company, upon tbe default of tbe agent, Tom Douglas, to pay premiums collected, to immediately cancel tbe agency contract, require an accounting and cancel policies issued by Douglas upon which premiums bad not been paid to tbe insurance company, and that the failure or neglect of tbe insurance company to do so relieved and discharged tbe surety from liability on the bond. Tbe theory or purported defense is in conflict with tbe plain terms of tbe bond. Tbe bond not only provided that the principal should pay over to the insurance company all moneys, securities, and sums due for premiums on policies of insurance during or at tbe termination of the agency of Douglas, but by its terms tbe sureties waived notice of breach of tbe conditions of tbe bond by tbe principal, and it was provided thereby that knowledge of such breach by the insurance company would! not relieve tbe sureties of liability. Likewise, it was specified that tbe agency might be continued after such a breach or the insurance company might elect to take from tbe agency any security or close accounts, etc., without affecting liability of surety on tbe bond. Watkins Co. v. Pruitt, 130 Okla. 231, 266 P. 770; Vogel Bros. & Co. v. Bastin, 84 Okla. 273, 203 P. 210. Tbe obligation of tlie surety was not conditional, but absolute. No act of connivance or gross negligence amounting to a fraud as against the rights of tbe surety was alleged or relied upon or established by tbe evidence to relieve tbe surety from bis liability, but tbe conduct of the insurance company, in its effort to overcome the mere negligent and dilatory acts of the agent by which default in payment resulted, seems to have been as contemplated by the terms of tbe bond by which tbe surety was bound. Star Ins. Co. v. Carey (Kan.) 267 P. 990; Southern Surety Co. v. McMillian Co. (10 C. C. A.) 58 F. (2d) 541. In tbe last-cited case tbe rule was followed that a surety’s liability on bond for ¡performance of contract was not terminated by obligee’s failure to notify surety of principal’s default within the time specified in a bond in the absence of prejudice. Herein such notice was waived. Neither tbe fact that Tom Douglas assigned the agency to another with provision for its operation for benefit of creditors nor the fact of a subsequent sale of the agency relieves tbe surety, for there is nothing in tbe record to show that the rights of tbe surety were prejudiced thereby. Osage O. & R. Co. v. Dickason-Goodman Lbr. Co., 106 Okla. 119, 231 P. 475; National Union Fire Ins. Co. v. McDonald, 120 Okla. 226, 203 P. 273; Capps v. Ins. Co. of N. A., 153 Okla. 38, 6 P. (2d) 1041. The judgment is reversed and the cause remanded, with directions to render judgment) in favor of tbe insurance company and against the surety, Oles I. Clouse, according to the motion for an instructed verdict. McNEILL, C. J., and BUSIBV, PHELPS, and CORN, JJ., concur.