Home Savings Bank v. Massachusetts Bonding & Insurance

George, J. (After stating the foregoing facts.) 1. The foregoing statement is by no means exhaustive of the facts in this case, as they appear from the record of more than 400 pages, but they are sufficient to indicate that the court rightly overruled the demurrers to the defendant’s pleas; and no reversible error appears in the court’s charge. It is undoubtedly true that ‘while the bond in this case may resemble a contract of suretyship, it is in effect a contract of insurance, to which the rules of construction peculiar to contracts of suretyship would not apply, biit to which the rules governing ordinary contracts of insurance are applicable. Hormel v. American Bonding Co., 112 Minn. 288 (128 N. W. 12, 33 L. R. A. (N. S.) 513). In John Church Co. v. Ætna Indemnity Co., 13 Ga. App. 826 (80 S. E. 1093), this court said: “Viewed as insurance contracts, the contracts of an organization writing fidelity insurance are to be governed by rules applicable to insurance companies, and when the contract is fairly susceptible of two constructions, one favorable and the other unfavorable to the indemnity company, the latter is to be adopted. It is but the familiar rule that ambiguities are to be construed most strongly against the insurer.” To the same general effect is the almost unbroken current of authority, and citation of the many cases supporting this view would be entirely useless. In our opinion, the bond in this case and each renewal certificate constituted the entire contract between the plaintiff and the defendant, and contained the warranties and covenants required of the plaintiff, in connection with the writing of the original bond; and the terms of the bond and the renewal certificates specifically modified, qualified, and controlled the statements made by the plaintiff in connection with the original bond and the renewals, so that the said statements, by the intention of the contract, were made only so far as the plaintiff had knowledge, and were not absolute, unconditional affirmations of the representations which they contained, but only representations of the knowledge of the plaintiff. Each statement furnished the defendant by the plaintiff, after the first, must be given the construction clearly indicated in the original bond; and, as there indicated, such statements were only as to the knowledge of the plaintiff, and were not absolute and unconditional affirmations of the matters referred to therein. This construction is consistent with the intention of the parties, — 363 — and is in harmony with the great weight of decided cases dealing with the question. However, the demurrers to the pleas were properly overruled, because it is distinctly alleged in these pleas that no audit or examination of the books and accounts of the employee Waddell was made as and at the times stated in the declaration furnished the defendant by the plaintiff. It is also distinctly alleged in these several pleas that if such examinations were in fact made, the plaintiff knew of the dishonesty of Waddell, because his books on their face showed such dishonesty. It was certainly proper for the defendant to show, if it could, that no examinations were made by the bank, as stated by it to the defendant, but, if made, the bank had knowledge of Waddell’s dishonesty. We therefore conclude that there was no error in overruling the demurrer to the. pleas set out in the amendment to its original answer. 3. The plaintiff insists that a new trial should have been granted it upon the general statutory grounds, and upon 19 additional grounds, complaining of certain charges given by the judge to the jury. As already indicated, we think the verdict is supported by the evidence. The evidence was in conflict upon the material issues in the case, and, while it would have sustained a finding for the plaintiff in a substantial sum, it can not be said that the verdict is without evidence to support it. The case was well prepared, and was submitted to the jury with great skill and ability. Doubtless every material fact and circumstance was before the jury. Not only was the evidence developed in minute detail by the witnesses, both expert and ncn-expert in such matters, but the books of the bank were admitted in evidence, and the jury was authorized to find that the plaintiff either did not make examinations of Waddell’s accounts as claimed by it, or, if such examinations were in fact made, that knowledge was thereby obtained on the part of the bank of the actual condition of the books. There is no reason to suppose that the jury was friendly to the defendant and unfriendly to the plaintiff. The contrary presumption, if there be ground for speculation, might be indulged. 3. Certain charges of the court are excepted to in grounds 4, 5, 6, and 7 of the motion for a new trial, as intimating and expressing an opinion upon the facts of the case. On careful examination of the record it appears that the trial judge read to the — 364 — jury, in detail, the pleadings of the parties, and also read to the jury certain stipulations between counsel. Further in the charge he undertook to apply the law of the case to the contentions of the defendant, and in making this application the charges attacked as intimating an opinion were given. We do not think that these charges are subject to the criticism made. The jury undoubtedly understood the purpose of these charges. 4. The court gave in charge to the jury sections 2479 and 2480 of the Civil Code of 1910. It is contended, in the. 8th and 9th grounds of the motion for a new trial, that in so doing the court committed harmful error against the plaintiff. Whether these sections were applicable to the facts of this case need not be considered. The court instructed the jury that these sections of the code should be applied only to that part of the application which was signed by the bank itself. The application undoubtedly included the statement made by the bank, the obligee named in the bond. No release of liability on'account of anything stated in Waddell’s application, or any such part of the application as’was made by Waddell, was pleaded, but the defendant insisted that the statements made by the bank, concerning the condition of Wad-dell’s books and accounts, and relating to the manner in which he performed his services as treasurer of the bank, were false and fj audulent. In addition the court instructed the jury that, if the bank acted in good faith in making the statements to the bonding company and disclosed to the company all the material facts within its knowledge, then such statements, without exception, hereinafter noted, if false, would not .void the bond. 5. The instructions complained of in the 10th, 12th, 13th, 16th, and 17th grounds were not, for any of the reasons assigned, erroneous. In the 11th ground exception is taken to an instruction to the effect that if the jury should find that the statement that the books of the bank were audited on the 18th day of December and were correct in every particular was a material representation, and that this statement was not in fact true, either because the books were not audited or because, being audited, they did not show that the accounts of Waddell were true in every particular, and if they should further find that the variation was a variation by which the nature or extent or character of tbn risk was changed, then the policy would be void. One ground of ex — 365 — ception to this charge is that the court confined the plaintiff to the exact date, December 18, 1910. This exception is not well taken, because the court expressly stated to the 'jury that the variation from this statement, in order to affect this bond, would have to be material, and of such character as would change the nature, extent, or character of the risk. This charge was correct. It would not have been proper for the judge to state to the jury that it was immaterial, under the facts of the ease, whether the audit was made on the 18th or the 14th of December. He properly left it to the jury to say whether or not an examination of the accounts of Waddell was made on December 18, 1910, as represented in the statement made by the bank to the defendant, and, if not, whether, by the variation, the nature or extent or character of the- risk assumed by the defendant would be changed. It was for the jury, and not for the court, to say whether any representations inducing the defendant to execute its bond insuring the fidelity of Waddell were true or untrue, or whether the statements were material or immaterial, or whether such statements were so material as to vary the nature, extent, or character of the risk assumed by the defendant company. It is to be noted that a statement made to the defendant that the books of Waddell were on a certain date examined is a statement within the knowledge of the bank. That portion of the statement which relates to the -information derived from such examination is not necessarily within the knowledge of the bank,, and, if made in good faith by the bank, would not defeat the plaintiff’s action. 6. The charges referred to in the 14th, 15th, and 18th grounds of the motion for a new trial do not require discussion. These charges are not subject to the exceptions taken. The charges may contain certain inaccuracies of expression, but they do not contain an incorrect statement of any controlling principle of law applicable to the facts'of the case. In the 22d ground it is complained that the judge confused preponderance of evidence with proof to a reasonable and moral certainty. This criticism seems to be well founded. However, this charge did not immediately follow the contentions of the plaintiff; and since the burden in this case was upon the defendant to establish its affirmative pleas, the charge was more harmful to the defendant than to the plaintiff. In addition, the charge of the court fully explained to the jury that in the instant case the preponderance of the evidence should control. — 366 — 7. The assignments of error in the 19th, 30th, and 31st grounds of the motion remain for consideration. The judge here read to the jury a portion of the statement furnished by the plaintiff to the defendant under date of October 19, 1913, asking for an increase in the amount of the bond of Waddell from ten to fifteen thousand dollars. The court thus charged in effect that if this statement was material to the risk and the bonding company believed it was true, and acted upon it and granted an increase in the amount of the bond from ten to fifteen thousand dollars, but if in point of fact the books and accounts of Waddell were not at that time correct in every respect, and there was a variation by which the nature or extent or character of. the risk was changed, the bond would be void, “in so far as the increase of the bond was concerned,” and that this would be true although the president of the bank, in making this statement, may have acted in good faith and may have believed that the statement was true; that where the insurer is induced to enter into the contract by a representation as to a material fact, the policy will be void where the representation was made wilfully, with intent to deceive, or through an innocent mistake. Further, and in the same, connection, the court charged the jury that the same rule that he had given in connection with the application to increase the liability under the bond from ten to fifteen thousand dollars would apply “as to these other matters to which I have directed your attention.” He then proceeded to remind the jury that it was alleged by the defendant that at the time of the execution of the bond and on the several occasions when it was renewed the plaintiff stated that examinations of the books of Waddell were made at certain times, and that these audits showed the books to be correct, and that the same rule applied to those “instances of defense to which I have already directed your attention, in so far as the examinations were concerned; but in those cases, as already charged you, if the examinations were in point of fact made, and the result of the audit or examination showed that the books and accounts of Waddell as treasurer were correct, then the representations would not void the policy, if the Home Savings Bank, in good faith, believed that they were correct and made the representations believing that they were correct.” The court did, however, in the same connection, leave it to the jury to say whether in point of fact the bank had examined — 367 — or audited the books of Waddell. He concludes the instruction on the effect of the statement dated October 19, 1912, and made by the plaintiff with the positive statement that “the matter I referred to is the increase of the policy from ten to fifteen thousand dollars.” The concluding statement of the charge is this: “If that increase is void—if you find that to be void from ten to fifteen thousand dollars—why, then the plaintiff in no event could recover over $10,000, because that would leave the bond only $10,000.” In.our view these charges incorrectly stated the law of this ease. The statement of October, 1912, was made for the purpose of increasing the liability fixed by the terms, provisions, and conditions of the original bond, and this statement must be considered as modified by the provisions of that bond. The original bond in this case did not contemplate that statements made by the employer were to be considered as positive and unconditional affirmations of the truth of the matter therein contained, but meant that such statements were true only to the knowledge of the employer. As a general rule, it can not be said that an erroneous instruction, as this was, resulted in no harm to the losing party. . In this case, however, it is clear to the point of demonstration that the charge did not harm the plaintiff. The jury could only have understood from this charge that it related to the increase in the liability of the bond from ten to fifteen thousand dollars. Indeed, the judge clearly and repeatedly stated to the jury that this rule which he was then .giving them applied only to the increase in liability of the bond, and did not affect the original bond or any renewal thereof. The jury found for the defendant upon its affirmative pleas, and returned to the plaintiff the amount of premiums paid by it for the bond and its renewals. This was a clear finding that the bond was void; and, inasmuch as the jury found, under substantially correct instructions by the court, that the plaintiff was not entitled to recover any amount, and that the bond was void by reason of the things affirmatively pleaded by the defendant, a reversal is not required on account of this error in the charge of the court. The court therefore did not err in overruling the motion for a new trial. Judgment affirmed on the main bill of exceptions; cross-bill dismissed. Wade, O. J., and Luke, J., concur.