Glidden v. United States Fidelity & Guaranty Co.

Sheldon, J. The defendant by the bond sued upon undertook to make good to the plaintiff such pecuniary loss as he might sustain from any dishonesty of one Sutherland, who then had been for more than a year employed by the plaintiff as a clerk. There has been a breach in the condition of the bond; and the question now presented is whether it can be enforced against the defendant. The defendant issued the bond upon the faith of a written statement signed by the plaintiff, and containing certain statements material to the defendant’s undertaking. The auditor has found that these statements were false, and also that the plaintiff did not disclose to the defendant material facts within his knowledge, but suppressed them, and thereby misled the defendant into issuing the bond, which the defendant would not have done if it then had known what the plaintiff knew about the habits and reputation of Sutherland. It is not contended that the provisions of Hi L. c. 118, §§ 59, 73, (see now St. 1907, c. 576, §§ 59, 73,) are applicable to this instrument. The question accordingly is whether there is any evidence to control the auditor’s findings. The statements made by the plaintiff were as follows: “ He [Sutherland] has always, to the best of my knowledge and belief, given satisfaction in his personal conduct and performance of duties, and kept his accounts faithfully and without default. When last examined or audited by me, on the thirty-first day of October, 1900, all the accounts of his office were found in every respect correct up to October 31st, 1900. He has not been, nor is he at present, so far as I know or believe, in arrears or default, or with unsettled balance, in this or any previous service. I know of nothing concerning his habits or antecedents, affecting his title to confidence, and I know of no reason why the guarantee hereby applied for should not be granted.” Manifestly the plaintiff’s statement that he had examined Sutherland’s accounts on October 31,1900, a week before the date of the defendant’s bond, and found them correct in every respect up to that date, was material to the defendant’s under [113] taking. It bore directly upon the nature and extent of the risk which the defendant agreed to bear; and if in fact this representation was false, whether intentionally or from honest mistake on the part of the plaintiff, it plainly increased the risk, and the plaintiff could not hold the defendant to the agreement which it had made upon the faith of this statement among others. This principle is settled by our own decisions as to ordinary contracts of insurance. Rainger v. Boston Mutual Life Association, 167 Mass. 109. Cobb v. Covenant Mutual Benefit Association, 153 Mass. 176. McCoy v. Metropolitan Ins. Co. 133 Mass. 82. Campbell v. New England Ins. Co. 98 Mass. 381, 396. Towne v. Fitchburg Ins. Co. 7 Allen, 51. The question has been expressly decided in other courts in actions upon agreements like the one here before us. Warren Deposit Bank v. Fidelity & Deposit Co. 116 Ky. 38. Carstairs v. American Bonding & Trust Co. 116 Fed. Rep. 449. The principle involved has been often recognized and is of general application. Smith v. Bank of Scotland, 1 Dow, 272, 292. Railton v. Mathews, 10 Cl. & Fin. 934. Lee v. Jones, 17 C. B. (N. S.) 482. Franklin Bank v. Cooper, 36 Maine, 179; S. C. 39 Maine, 542. Graves v. Lebanon National Bank, 10 Bush, 23. Model Mill Co. v. Fidelity & Deposit Co. 1 Tenn. Ch. App. 365. Issaquah Coal Co. v. United States Fidelity & Guaranty Co. 126 Fed. Rep. 89. Carrollton Furniture Manuf. Co. v. American Credit Indemnity Co. 115 Fed. Rep. 77. There is nothing in Hudson v. Miles, 185 Mass. 582, Winthrop v. Soule, 175 Mass. 400, or Child v. Boyd & Corey Manuf. Co. 175 Mass. 493, at variance with what we have said. Nor do we find any evidence to control the finding of the auditor that this statement was untrue, made for the stated reason “ that a merely cursory examination of checks drawn against his [the plaintiff’s] bank account for that period, and paid, if he had made it, would have disclosed to him several obvious forgeries, and presumably several conversions of funds wrongfully drawn over the genuine signature of the plaintiff by . . . Sutherland.” Examination of the forged checks, however good the imitation of the plaintiff’s signature might be, would scarcely tend to show that they would have deceived himself, who knew just what checks he had entrusted to Sutherland; nor would his [114] lack of education and deficiencies as a bookkeeper tend to show that he had examined and audited Sutherland’s accounts and found them correct. The assertion made by the plaintiff in his statement that he had made such examination and audit is not made competent evidence under R. L. c. 175, § 66, by reason of the plaintiff’s death before the trial of the case, because it does not appear to have been offered in evidence under that statute, and was not found by the judge to have been made in good faith, which is made by the statute itself one of the conditions precedent to its admissibility. Dickinson v. Boston, 188 Mass. 595, 597. Dixon v. New England Railroad, 179 Mass. 242, 245. Such a declaration as this hardly could have been made in good faith unless actually known at the time by the declarant to be true. There is no question made that Sutherland was at this time a defaulter to a large amount, and that a proper examination of his accounts would have disclosed the fact. Under these circumstances, it was the right of the defendant to have a verdict ordered in its favor; and we need not consider whether there was evidence on which the jury might have reached conclusions different from the other findings of the auditor. Exceptions overruled.