American Fidelity Fire Insurance v. Builders United Construction, Inc.

John I. Purtle, Justice. Appellant filed a suit against appellees to recover money paid on appellees’ behalf while acting as surety for them on a construction contract. Appellant issued its policies without the signature of a valid agent as required by Ark. Stat. Ann. § 66-2221 (Repl. 1980). Appellees’ motion for summary judgment was granted on the grounds that contracts in violation of a statute are void even though not expressly declared so. The court further held that it would not lend its authority to enforcement of recovery under the terms of an illegal contract. The only argument on appeal is that the trial court erred in granting appellees’ motion for summary judgment. We agree with the trial court and affirm the order granting a summary judgment to appellees. American Fidelity Fire Insurance Company issued a performance bond as surety on behalf of Builders United Construction, Inc. The construction company defaulted and American Fidelity suffered losses totaling $82,071.19 in completing the contracts which they had guaranteed. At the time the surety contract was entered into Terry Hardesty, Sandra Hardesty, Larry McGarrah, Louise McGarrah, Ray Rogers and Carol Rogers signed a general agreement of indemnity in which they agreed to be personally liable for any losses incurred by the guarantor. On June 1, 1978, the insurance company, appellant, filed suit in the Benton County Circuit Court against the appellees seeking to recover the amount of damages incurred in completing the contracts. Ray Rogers and Carol Rogers filed an answer denying all liability to appellant. Larry McGarrah and Louise McGarrah denied all liability to appellant. Neither the Hardestys nor Builders United Construction filed any pleading. Payment in accordance with the agreement of indemnity was denied for the reason that the appellant’s agent was not licensed to sign the surety policies. The trial court found that the agent for American was not licensed as an agent in the state of Arkansas as required by law. The court further found that the policies were not countersigned by a resident licensed agent as required by law. All parties agree that Ark. Stat. Ann. § 62-2221 (Repl. 1980) requires a performance bond to be issued through an agent in this state. The statute recites that the mere countersigning of a bond by an agent shall not be sufficient. The penalty for violation of this statute allows the commissioner of insurance to revoke the certificate of authority of any insuror which violates this policy. Therefore, there is no disagreement about the fact that appellant failed to comply with the statute relating to issuance of such policies. In the case of Vick Consolidated School District No. 21 v. New, 208 Ark. 874, 187 S.W. 2d 948 (1945), we stated: There are those cases in which an individual has dealt with the district, council, board, or other governmental subdivision in plain violation of the letter of the statute, and has received public money under a course of dealings forbidden by statute. In those cases the courts have not only refused the individual the quantum meruit for his services rendered, but have also allowed recovery by the governmental subdivision of any monies paid the individual, on a contract forbidden by statute. In the case of Gantt v. Arkansas Power & Light Co., 189 Ark. 449, 74 S.W. 2d 232 (1934), we stated: It seems to be the rule of universal application that any contract prohibited by a constitutional statute is absolutely void. We cited as authority for the foregoing statement Ridge v. Miller, 185 Ark. 461, 47 S.W. 2d 587(1932). In Gantt we held that if the contract is void from its inception because it is prohibited by statute, it cannot be vitalized by subsequent acts of the parties thereto. Therefore, the appellant cannot force compliance with its illegal contracts. We think the summary judgment was proper because there were no unresolved issues of fact to be determined by the trial court. Since we agree with the decision of the trial court, the case must be affirmed. Affirmed. George Rose Smith and Hays, JJ., dissent.