St. Louis Police Relief Ass'n v. American Bonding Co.

ALLEN, J. (after stating the facts). — The objection made to the introduction of the bond below, viz. that it had not been signed by Healy, we regard as without merit. True it is that the bond provided that it was essential to the validity thereof that it be signed by the employee. Defendant was entitled to have it so signed, but this was a right which defendant could waive if it saw fit. The rule stated in St. Louis Ass’n v. Obert, 169 Mo. 507, 69 S. W. 1044, on which appellant relies, has here no application. Defendant is a corporation engaged in the business of acting as. surety for hire. In respect to its obligation to indemnify plaintiff, defendant is virtually in the position of an insurer. [See Krey Packing Co. v. U. S. F. & G. Co., 189 Mo. App. loc. cit. 599, and cases cited, 175 S. W. 322; Tebbets v. Mercantile Guarantee Co., 73 Fed. 95, 19 C. C. A. 281.] Having issued and delivered this bond without requiring the signature of Healy, and having accepted from year to year the various premiums paid by plaintiff therefor, treating the instrument as one properly executed until a loss occurred, defendant will [444] not now be permitted to repudiate its obligation on the ground that Healy’s signature is lacking. [Rule v. Anderson, 160 Mo. App. 347, 142 S. W. 358.] In view of the pleadings and evidence, as shown above, we regard it as entirely clear that the trial court properly refused to take the case from the jury, and that the court properly instructed that by the pleadings the facts mentioned in plaintiff’s first instruction stood admitted, and that the burden was upon defendant to establish the special defenses set up in its answer. It is unnecessary to here refer to the allegations of the petition, and the contents of the answer seriatim, which are fully shown above. The specific admissions of the answer, coupled with the failure to deny, by general denial or otherwise, the.averments of the petition stating a cause of action on the bond, left nothing to be submitted to the jury except the special defenses asserted. By the form of its answer defendant appears to have assumed the burden of proving the allegations of its answer to the effect that plaintiff had failed to act in accordance with the answers given in its “statement'’ made wdien the bond was applied for. But defendant urges that these answers were “conditions precedent” to liability on the bond, that it consequently devolved upon plaintiff to affirmatively establish compliance therewith, and that plaintiff failed to show that proper examinations and audits of Healy’s books were made, and report thereof duly made to the executive committee.of plaintiff association, in accordance with the answers contained in the said “statement” of plaintiff. But we think that’these answers were not conditions precedent, and that calling them such in the statement could not have- the effect of making them conditions precedent. [See Title Guaranty & Surety Co. v. Nichols, 224 U. S. 346, 32 Sup. Ct. 475, 56 L. Ed. 795; Freeman v. Travelers’ Ass’n Co., 144 Mass. 576, 12 N. E. 372; Krey Packing Co. v. U. S. F. & G. Co., supra.] They did not purport to be statements of existing facts, the falsity of which would operate to prevent the contract from becoming effective, but were essentially covenants or prom [445] issory warranties respecting plaintiff’s future conduct, the breach of which might operate to defeat the contract after it had come into effect. In regard to this we cannot do better than to quote from the learned opinion of Mr. Justice Lurton in Title Guaranty & Surety Co. v. Nichols, supra, as follows: “The question was whether this requirement was a condition precedent to liability which the bank was required to aver and prove or whether it was a defense to be made out by the defendant. But a construction which makes the bond inoperative until the employer shows that it had made such examinations is not a fair and reasonable interpretation. The distinction between conditions precedent and subsequent is. plain enough. The condition here involved, if properly a condition at all, is of the latter class. “The coming into effect of a contract may be made to depend upon the happening or performance of a condition. But a condition subsequent presupposes a contract in effect which may be defeated by the happening or performance of a condition. "Where, therefore, an action is upon a contract subject to a condition precedent, the performance of that condition must be averred and proved; but if the contract sued upon is subject to a condition subsequent, there is no occasion for any averment in respect to the condition. It is a matter óf defense, which must come from the other side. [1 Chitty, Pl., pp. 246, 255.] ‘£ The plaintiff, was plainly entitled to recover upon proving the bond, an embezzlement, and a breach by a refusal to indemnify. It was not obliged to aver that it had made the examinations -tihich it agreed should be made. If it had failed in that duty, it was for the surety company to so plead and prove. Such, indeed, was the course of the pleading in this case, and a breach of the agreement to make such examinations was set up as a defense. There was no error in the ruling of the court that the onus was upon the surety company to prove a breach of the obligation to make examinations” — citing cases. [446] In this connection it may be noted that the only requirement of the bond that i& made a condition precedent to a recovery thereon is “the actual payment to the surety of the premium, or of any renewal premium.” And it is quite clear that the evidence by no means conclusively showed a breach of the obligation resting upon plaintiff with respect to the examination and auditing of Healy’s books and accounts, as contended. True, there is some evidence tending to make it appear that plaintiff failed in its duty in' this respect; -but, as said above, witnesses who testified in favor of defendant on this issue, denying that audits and reports were made, were confronted by reports of auditing committees signed by the witnesses themselves as members of such committees. On this issue the evidence did nothing more than raise a question of fact for the jury, which is now concluded by the verdict. [See Gannon v. Laclede Gaslight Co., 145 Mo. 502, 46 S. W. 968, 47 S. W. 907, 43 L. R. A. 505.] Appellant lays some stress upon the so-called renewal certificates, executed by plaintiff, in connection with- the annual renewals or continuations of the bond. But the fact that these certificates stated that Healy had faithfully, honestly, and punctually accounted for all money and property in his custody, etc., and- was not then in default, does not, standing alone, preclude a recovery by plaintiff on the bond. The statements meant nothing more than that there had been no discovery of any defalcation during the preceding year. And if plaintiff in good faith' knew of no defalcation, and had no reason to believe that one existed, and in such belief made the certificates, a recovery could not be denied merely on the ground that such certificates had been executed. To so hold would mean that by signing and furnishing these certificates, though in good faith, plaintiff waived all liability of defendant upon the bond as for an undiscovered default of plaintiff’s employee during the preceding year, the very thing against which plaintiff sought protection by taking the bond. Other questions incidentally touched upon in the briefs do not warrant discussion. We perceive no rever [447] sible error in the record, and the judgment should accordingly he affirmed. It is so ordered. Reynolds, P. J. and Becker, J., concur.