ROARK v. CITY TRUST, SAFE DEPOSIT & SURETY CO. et al.

(Kansas City Court of Appeals. Missouri. May 4, 1908.)

1. INSURANCE - INDEMNITY INSURANCE-CONTRACTS-CONSTRUCTION.

A contract of suretyship against loss by dishonesty of an employé is in effect a contract of insurance, and must be construed as an insurance policy, and, when drawn by the surety, it must be construed most strongly against it. [Ed. Note.-For cases in point, see Cent. Dig. vol. 28, Insurance, § 295.]

2. SAME-FIRE INSURANCE-CONTRACT.

Where an application for fire insurance is made and the terms thereof are agreed on between the insurer's authorized agent and the insured, and it is agreed that a policy embodying such terms shall be issued, the agreement is complete, though credit be extended for the premium, and, where a policy is subsequently issued, it relates back to the time specified for the insurance to begin, and covers a loss within that time.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 28, Insurance, § 365.]

3. SAME-INDEMNITY INSURANCE-CONTRACT. An application for insurance against loss through dishonesty of an employé was made July 23d, with the request that it be dated back to July 15th. The employer signed a statement by filling out a blank furnished by insurer. The application and statement were delivered to the agent of the insurer, and the premium was paid to him. The terms of the insurance were agreed on, and they were to become binding on the insurer receiving satisfactory responses from references furnished to it. The responses were received and were found satisfactory, and the application was indorsed as approved on August 15th. Held, that the contract of insurance became binding from that time, though the policy was not issued until afterwards.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 28, Insurance, § 365.]

4. SAME-FRAUD OF EMPLOYER.

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Where an employer had obtained a plete contract of insurance against loss through dishonesty of an employé, but had not procured the policy of insurance, the employer was not guilty of fraud in not disclosing his knowledge of loss when writing to the insurer and its agent inquiring why the policy had not been issued and delivered to him, since the knowledge or ig norance of the defalcation of the employé would not in any way affect the contract. 5. SAME-WAIVER.

An insurer insuring against loss through dishonesty of an employé cannot first ignore the fraud, if any, of the employer, and retain the premium paid by him, and carry on negotiations

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for proof of amount of a loss sustained through the dishonesty of the employé, and announce for the first time in an action for the loss that the employer was guilty of fraud.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 28, Insurance, §§ 1071–1075.]

6. SAME NOTICE OF Loss-WAIVER.

A policy insuring against loss through dishonesty of an employé provided that as soon as any act of omission or commission of the employé should come to the knowledge of the employer the latter should notify insurer. On October 12th the employer wrote to the agent of the insurer and to the insurer, notifying them that the employé had absconded on September 26th preceding, leaving a shortage of a specified amount. On the following day the agent of the insurer acknowledged receipt of the notice, and requested the employer to send other information he might obtain. The correspondence between the parties, extending until April following, showed that insurer only desired to know the amount of the liability. Held, to show a waiver of any insufficiency in the notice of loss.

Appeal from Circuit Court, Johnson County; Nick N. Bradley, Judge.

Action by J. E. Roark against the City Trust, Safe Deposit & Surety Company and others. From a judgment for plaintiff, defendants appeal. Affirmed.

O. L. Houts and Paul V. Janis, for appellants. J. W. Suddath, for respondent.

ELLISON, J. The plaintiff was superintendent of the Metropolitan Life Insurance Company, and had engaged in service in places of trust a number of employés. The one concerned in this case was John W. Clary. He desired to be indemnified against loss through the dishonesty of Clary, if such misfortune should occur. The latter applied in writing to defendant as a surety company for a bond indemnifying plaintiff. A bond was afterwards executed by defendant to plaintiff, dated July 15, 1904. Afterwards, in the latter part of September, Clary embezzled funds of the company in the sum of $494.55 and absconded. This action is founded on that bond, and plaintiff recovered judgment in the trial court.

Written application was made for the bond on July 23d, with the request that it be dated back to July 15th, that being the time of the last examination of Clary's account with his

employer. Plaintiff signed an employer's statement by filling out a blank furnished by defendant. The application and statement were delivered by plaintiff to defendant's agent at St. Louis on July 25th, and the premium, $3.75, was paid to him, for which he he gave a written receipt: "For premium on bond, as follows: * * J. W. Clary from 7/15/04, $500. Premium $3.75." The application made by Clary and delivered by plaintiff contained the names of persons whom he gave as reference, and the trial court found that the evidence showed a valid agreement for a bond if these references responded satisfactorily to defendant's inquiries. It further found that such responses were favorable, and that they were received by defendant about August 3d, and that on August 15th the application was approved by the indorsement thereon: "Approved 8/15, 1904. J. W. Anderson." Though the application was thus approved, the surety bond was not issued and forwarded to plaintiff until October 4th. This delay was occasioned, not by a desire for further inquiry, but for the reason that defendant had in some way, become impressed with the idea that plaintiff wished it to hold the bond until other applications which were to be made had been received. The defendant expressed regret at the delay. Plaintiff's office was at Sedalia, while Clary's headquarters were at Warrensburg, the distance being about 40 miles. Plaintiff was notified on September 26th that Clary had absconded, and on next day he went to Warrensburg to investigate and examine his accounts. Realizing that he had not yet received the Clary bond, plaintiff, on September 27th, next day after learning of his having absconded, wrote to defendant's agent at St. Louis asking if the application had been approved, and, if so, when he might expect the bond. He said nothing as to what he had learned about Clary. Several days later, on October 4th, plaintiff wrote to defendant at Philadelphia asking if the application had been approved and what was causing the delay, and, if it was for lack of replies from references, he could perhaps assist in getting such replies. In this letter plaintiff also failed to state that he had information that Clary had absconded. It was in answer to this last letter that defendant wrote under date of October 6th that it had sent the bond on October 4th, and had not sent it sooner because of the impression spoken of above, and expressing regret at the delay. Plaintiff received the bond, and then, on October 12th, he wrote to both the agent at St. Louis and to defendant at Philadelphia notifying them that Clary had absconded on September 26th, leaving a shortage of $494.55. On the next day, October 13th, the agent at St. Louis acknowledged receipt of the notice, and asked plaintiff to send any other information he might obtain. There was further correspondence, to which we will refer further on.

The defendant contends that it was led to issue the bond through the fraud and deception of plaintiff in the letters asking that the bond be sent to him when he knew of the defalcation and fraudulently suppressed such knowledge. The contention is that no valid contract was made by defendant. A contract of suretyship against loss by dishonesty of employés is for all practical purposes a contract of insurance, and the contract must be governed and construed as an insurance policy. Shakman v. U. S. System Co., 92 Wis. 366, 66 N. W. 528, 32 L. R. A. 383, 53 Am. St. Rep. 920; Champion Ice Co. v. American Bonding Co., 115 Ky. 863, 75 S. W. 197, 103 Am. St. Rep. 356. An insurance company's contract, drawn by such company, is to be construed most strongly against the company. Wertheimer Shoe Co. v. Casualty Co., 172 Mo. 135, 72 S. W. 635, 61 L. R. A. 766, 95 Am. St. Rep. 500; American Surety Co. v. Pauly, 170 U. S. 133, 18 Sup. Ct. 552, 42 L. Ed. 977. And no reason exists why the same rule should not apply to a bond surety company giving bond to secure employers against loss by dishonesty of employés. With this preliminary statement of the law, we will ascertain whether there was a valid contract between the parties, and when it took effect.

When an application for fire insurance is made and the terms thereof agreed upon between the company's authorized agent and the insured, and a policy agreed to be issued embodying such terms, the agreement is complete, even though credit be extended for the premium. Baldwin v. Insurance Co.. 56 Mo. 151, 17 Am. Rep. 671; Worth v. Insurance Co., 64 Mo. App. 583; Palm v. Insurance Co., 20 Ohio, 529; Krumm v. Insurance Co., 40 Ohio St. 225. If a policy is afterwards issued, it relates back to the time specified for the insurance to begin, and covers a loss within that time, and from the time of issuance its conditions become effective. The cases of Horton v. Insurance Co., 151 Mo. 604, 52 S. W. 356, and Kilcullen v. Insurance Co., 108 Mo. App. 61, 82 S. W. 966, are so unlike this in essential features as not to be in any way applicable. There is no reason why such rule should not apply to a bond surety company like this defendant, which is no less than an insurer against loss by the dishonesty of employés. In this case the evidence made it appear to the trial court, and it is clear to us, that the application for this suretyship for plaintiff's employé was made and all terms agreed upon, even to the payment at the time of a cash premium, and the contract was to become complete, and it would become binding when satisfactory responses should be received by defendant to the references to whom written inquiries had been addressed. These were received, were found to be satisfactory, and, as before stated, the application was indorsed as approved on Au

gust 15th. The contract was complete, and it became binding from that time. Defendant's answer admits it was to be bound when satisfied concerning the honesty of Clary, and it admits that it became satisfied. The 15th of August was more than six weeks before any knowledge by plaintiff of Clary's shortage, and before it can be claimed that plaintiff was guilty of any deceit or fraud.

Plaintiff thus having a complete and valid contract of insurance against loss through Clary's dishonesty was not guilty of fraud in not disclosing his knowledge of such loss when he wrote on September 27th and October 4th inquiring why the bond had not been issued. He doubtless wanted the bond in his possession. He knew that he had come to an agreement about the insurance, and that he had paid for it and done all that was incumbent upon him to do. His contract was in every way complete and there is no room for the charge of fraud in his asking for that to which he was entitled. This is made manifest by the suggestion that if plaintiff, in his letters to defendant asking why the bond had not been issued, had stated that Clary had absconded, defendant would still have been obliged to issue the bond. Knowledge or ignorance of the defalcation did not in any way affect the contract, for that was already in binding existence and force. We may concede, or rather infer, that plaintiff feared that knowledge by defendant of the defalcation might cause it to refuse to issue the bond, and for that reason he did not mention it in his letters. But that cannot affect the legal status of the contract. In two fire insurance cases in this state where application for insurance had been made and terms agreed upon, though the premium was not paid, and before a policy was issued a loss occurred, it was held that the insured in asking that the policy be issued was under no obligation to disclose his knowledge to the company that the fire had then occurred. Baldwin v. Insurance Co., 56 Mo. 151, 17 Am. Rep. 671; Worth v. Insurance Co., 64 Mo. App. 583.

But, even if we were wrong as to what has just been written, another consideration in respect to the insistence of fraud disposes of it adversely to defendant in so far as concerns its right to complain. As already stated, the ground for the charge of fraud rests upon the deceit of plaintiff in his letter of October 4th asking why the bond had not been sent, and making various statements therein calculated to cause defendant to think nothing was wrong at that time; yet, when plaintiff gave the notice on October 12th, he disclosed in such notice that he had knowledge of the defalcation and absconding of Clary when he wrote the letter of October 4th, in which it is claimed were the fraud and concealment. Defendant was thereby informed of whatever concealment and deception had been practiced, and yet chose either to regard it as not a fraud or else to waive

it. If a fraud, it was discovered by this notice of October 12th, which was the time defendant should have repudiated the bond and offered to return the premium. It will not be permitted to first ignore the fraud, retain the premium, and carry on negotiations for proof of amount of loss for months, and then, when finally sued, announce for the first time a claim of fraud. Promptness in disavowal of a contract is a prime condition to its repudiation. Taylor v. Short, 107 Mo. 384, 17 S. W. 970.

But it is urged that plaintiff failed to comply with the terms of the bond in regard to giving notice of defalcation. It was provided that, "as soon as any act of omission or commission on the part of any employé tending to fix a liability on the part of the company shall come to the knowledge of the employer, it shall be the duty of the employer to at once notify the company in writing of said act," etc. On the 12th of October, as we have already stated, plaintiff wrote of the whole matter to the agent at St. Louis and to the defendant at Philadelphia. Was this delay sufficient, under the circumstances of delay in issuing the bond, to avoid the policy? It is certain that defendant either thought it was not, or else determined to waive it, as we shall proceed to show. In thus showing a waiver we avoid the necessity of passing on the question argued by counsel whether the want of notice was made an issue by the pleadings, considering the allegations of both the petition and the answer. The notice which plaintiff sent on the 12th of October to both the agent at St. Louis and defendant at Philadelphia informed them of the time when he first learned of anything wrong with Clary, viz., on the night of the 26th of September. It informed them of his going to Warrensburg and investigating the account and the report he made to his company. He gave particulars of information he had received as to Clary's departure, as well as his photograph, with many other suggestions which might be of assistance to defendant. In acknowledging the receipt of this notice no suggestion was made or intimation given to plaintiff that it was out of time. On the contrary, the clear inference from the face of correspondence which extended over a period from October, 1904, until April, 1905, is that defendant only wanted to make sure of the amount of the liability. In this acknowledgment of receipt of the notice defendant's agent asked for any further information plaintiff might have. In the next (October 18th) he acknowledges receipt of Clary's photograph, and asked that a warrant for Clary's arrest be sworn out at. Warrensburg and to have an officer there notify the chief of police at St. Louis. He then stated the necessity of his examining Clary's books and papers at Warrensburg, and asked plaintiff to fix a time to meet him at that place. Telegrams and letters were exchanged as to this meeting at any time convenient to defend

ant's agent. On October 22d the agent wrote suggesting that plaintiff take out a warrant for Clary's arrest in Kansas City, if he should be located there. It appears from this letter that plaintiff and the agent each thought the other should swear out the warrant, and the agent complains that, had prompt measures been taken, referring to a warrant, "possibly Clary would have been located and arrested before this time." But no complaint was made as to want of notice. Plaintiff sent the agent some information as to what the sheriff had done in effort to locate Clary, and that he had written to the latter's father. On November 26th the agent acknowledged this, and says: "For all of which please accept thanks." He also asked if plaintiff will visit St. Louis soon, expressing a desire to meet him "and go over the matter of Clary's shortage, actions," etc. Letters were received by plaintiff from the agent through the winter and into April, 1905, in which are apologies for delay in settlement, and an admission that plaintiff had ground to complain. In no one of these is there any suggestion of a want of proper notice. On the contrary, plaintiff, at defendant's request, went to additional trouble and expense in regard to showing the loss and its extent and in the endeavor to locate Clary. Under the law in this state this was a waiver of complaint on any ground of insufficiency of notice. The reasons for this statement of the law are given, with citation of authorities, in Bolan v. Ass'n, 58 Mo. App. 225, and Dolan v. Insurance Co., 88 Mo. App. 666, and need not be gone over at this time.

For the several reasons herein, we are satisfied with the judgment of the trial court, and hence affirm the judgment. All concur.

WILSON v. REDDICK.

(St. Louis Court of Appeals. Missouri. April 28, 1908.)

APPEAL-REVIEW-FINDINGS OF FACT-CON

CLUSIVENESS.

Where there is substantial evidence to support a finding on conflicting evidence, the finding will not be disturbed on appeal.

[Ed. Note. For cases in point, see Cent. Dig. vol. 3, Appeal and Error, §§ 3979-3982.]

Appeal from Circuit Court, Stoddard County; J. L. Fort, Judge.

Action by Charles D. Wilson against John R. Reddick. From a judgment for defendant, plaintiff appeals. Affirmed.

Ralph Wammack, for appellant. Andrew W. Hunt, for respondent.

GOODE, J. Action of replevin for seven books containing abstracts of title to lands in Stoddard county. One of the books is described as the "Walter Phelan Abstract Book," another as the "Red Book," another as the "Red Book" containing the Index to Deeds of Trust, and four small "Tab Books."

An examination of the record and briefs shows there is no question raised on the appeal except the title of plaintiff to the books on the evidence. But the evidence is highly contradictory, and we are bound by the finding of the court below. According to the testimony for defendant, the Phelan book was originally the property of defendant and a man named Buchanan, and plaintiff never owned more than Buchanan's half interest in it. Plaintiff himself bought the two red books and the four tab books from a wholesale house in St. Louis, and whatever work was put in them to make them abstracts of title to Stoddard county lands was done by plaintiff. But at the time this work was performed he and defendant were in partnership in the business of furnishing abstracts of title, and, according to defendant's testimony, the books were purchased for the partnership. Plaintiff had his own name printed on the red books, but defendant swore they were bought by his (defendant's) order; that he had a half interest in them, had several times asked plaintiff what they cost, and plaintiff had promised to look up the bill, presumably so defendant could settle his half of it. In addition to this testimony he swore he and plaintiff dissolved partnership in 1904, and he then paid plaintiff for his entire interest in the business, including his interest in all the books in dispute, and covering the sum paid by plaintiff for the two red books. The evidence indicates defendant paid plaintiff $332 in one payment and $283 in another-$615 in all-for plaintiff's interest.

We find no declarations of law given or refused; and, as the evidence is conflicting regarding the title to the books, with substantial testimony in favor of defendant's right, there is nothing for us to do but affirm the judgment. All concur.

STATE v. LIPP.

(Kansas City Court of Appeals. Missouri. May 4, 1908.)

1. WEAPONS STRUCTIONS.

Where, in a trial for exhibiting a deadly weapon in a rude, angry, and threatening manner, the evidence tended to show that accused procured the gun when he saw prosecuting witnesses trespassing upon his premises, and that they resented his action, calling him vile and insulting names, and challenging him to put down his gun and come outside, where they declared they would whip him, an instruction recognizing his right to eject intruders upon his premises, but stating that if "he used more force than was necessary under the circumstances" he was guilty, was erroneous as misleading. 2. SAME TRESPASSERS-RIGHTS OF PROPERTY OWNERS.

Though one may resist a trespass on his property, he may not kill a trespasser; but if accused in going to forbid a trespass took a gun along only to resist any attack which might be made upon him for asserting his lawful right to forbid a trespass, and he made no demonstrations with the gun except in resistance to the

approach of the trespassers upon him for the purpose of assault, he did not commit an offense. [Ed. Note. For cases in point, see Cent. Dig. vol. 48, Weapons, § 17.]

3. SAME.

If witnesses violated notices posted by accused forbidding trespasses on his land, wrongfully tore down his fence, entered his land, and refused to leave, and started to assault him, he had a right to draw a gun on them in a threatening manner.

[Ed. Note. For cases in point, see Cent. Dig. vol. 48, Weapons, § 17.]

Appeal from Circuit Court, Putnam County; Geo. W. Wanamaker, Judge.

Joe Lipp was convicted of exhibiting a deadly weapon in a rude, etc., manner, and he appeals. Reversed and remanded.

John C. McKinley and N. A. Franklin, for appellant. Frank D. Goul, Pros. Atty., for the State.

ELLISON, J. Defendant was convicted of exhibiting a deadly weapon, a loaded shotgun, in a rude, angry, and threatening manner in the presence of three persons.

The evidence tended to show that different persons had been taking down defendant's fence and driving through a part of his farm. He put up a sign warning people to keep out. Perhaps the next day he noticed Clarence Towell and two Fleshmans drive up in a wagon, take down his fence and sign, and drive into his premises. He got his gun at the house and went down to meet them. He ordered them back, and they drove out. The evidence at this point tends to show that they resented his turning them back, and called him vile and insulting names, and challenged him to put down his gun and come outside, when they would whip him. There was evidence further tending to show that he drew his gun upon one or more of them. Defendant denied drawing the gun. He testified that he procured the gun when he saw the trespass being committed, and went to meet them for the purpose of forbidding them going over his premises; that he took the gun along only for the purpose of protection in case all of them assaulted him in resentment of his ordering them out.

Instruction No. 3 for the state was erroneous in that it was misleading. While recognizing defendant's right to keep trespassers off his premises, it went on to say that, if "he used more force than was necessary under the circumstances, they will find him guilty." Considering the evidence of all that passed between the parties when they met in connection with the specific charge of exhibiting a deadly weapon in an angry and threatening manner, the jury were left at liberty to consider something other than the exhibition of the gun as rendering defendant guilty.

Though one may resist a trespass on his property, he cannot be allowed to kill the trespasser. But if defendant went to meet the trespassers to forbid them going through his premises and turn them back, it was a

rightful purpose; and if he took his gun along only to resist attack in case an attack should be made upon him for thus asserting his lawful right, and if he made no demonstrations with the gun except in resistance to the approach of the trespassers upon him for the purpose of assault, he did not commit an offense. State v. Evans, 124 Mo. 397, 28 S. W. 8; State v. Matthews, 148 Mo. 185, 49 S. W. 1085, 71 Am. St. Rep. 594; Davis v. Modern Woodmen, 98 Mo. App. 713, 720, 73 S. W. 923.

In this view of the law defendant's refused instruction No. 2 should be given on retrial, amended by the words included in parenthesis, viz.: "The jury are instructed that if they find and believe from the evidence that the defendant at the time of the alleged offense was within his inclosure, and he had posted notices forbidding persons from entering same, and that the witnesses in violation of the terms of such notices wrongfully tore down defendant's fence so inclosing his said land and entered thereon, and refused to leave said premises, when defendant requested them so to do (and started to assault him), then defendant had a right to draw his gun on them in a threatening manner."

The judgment is reversed, and the cause remanded. All concur.

VAN METER v. POOLE. (Kansas City Court of Appeals. Missouri. May 4, 1908.)

1. APPEAL-REVIEW-QUESTIONS OF FACT. A finding of the trial court on an issue of fact must be accepted on review where supported by substantial evidence.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 3, Appeal and Error, §§ 3979-3982.]

2. SUBROGATION PRINCIPAL AND SURETY RIGHTS OF SURETY.

A surety on a mortgage bond who paid the deficiency on a sale under the mortgage was thereby subrogated to the rights of his principal under an agreement by a purchaser of the mortgaged premises to assume payment of the mortgage debt.

[Ed. Note.-For cases in point, see Cent. Dig. vol. 44, Subrogation, §§ 21-29.]

3. ESTOPPEL-EQUITABLE ESTOPPEL — RECITALS OF DEED-CONSIDERATION.

A surety on a mortgage bond who paid the deficiency on a sale under the mortgage, and was thereby subrogated to the rights of his principal under an agreement by a purchaser of the mortgaged premises to assume payment of the mortgage debt, is not estopped by recitals of the deed to show the real nature of the consideration. 4. FRAUDS, STATUTE OF-REAL PROPERTY.

An oral agreement on conveyance of real estate to assume payment of a mortgage debt thereon does not fall within the statute of frauds.

[Ed. Note. For cases in point, see Cent. Dig. vol. 23, Frauds, Statute of, §§ 101, 108, 122, 127.]

5. SAME PROMISES TO ANSWER FOR DEBT OF ANOTHER-ASSUMPTION OF MORTGAGE DEBT.

An agreement on conveyance of real estate to assume payment of the mortgage debt thereon as a part of the consideration is not to be con