Palatine Insurance v. Crittenden , 18 Mont. 413 ( 1896 )

De Witt, J.

The statement preceding this opinion gives the point so fully that there seems to be but little to say beyond citing a few of the leading authorities. We are of opinion that the ruling of the lower court upon the law was correct. We find it stated in 2 Brandt on Suretyship, § 422, that : £ £ If the party who takes a bond for the conduct of the principal in an employment knows at the time that the principal is then a defaulter in said employment, and conceals the fact from the surety, such concealment is a fraud upon the surety, and discharges him.” The author cites numerous cases upon this point. There are some cases to the contrary, but we are of opinion from a review of the decisions that the text of Brandt quoted states the law correctly.

Appellant relies upon this statement of the law, and contends that the evidence which the court struck out showed that the firm of Crittenden & Tucker were defaulters to the insur-anee company at the time when the company took the bond from Crittenden and his sureties, and that Crittenden, being a member of that firm, was also a defaulter when the bond was given, and that it was the duty of the insurance company, in taking the bond, to divulge this fact to the sureties. But upon a review of the evidence we are of opinion that the court was correct in holding that the evidence did not show that Critten-den was a defaulter, or that Crittenden’s former indebtedness to the company was a fraudulent one, but that it was simply a debt owing by him to the company. Appellant’s authorities, and his statement of the law, are therefore inapplicable.

Mr. Bartlett, the defendant, was called as a witness, and he does not pretend to claim that any representations were made to him by the insurance company as to the trustworthinéss of Crittenden. He made no inquiry whatever as to Crittenden’s former relations to the company, or his former good conduct towards the company in their business.

The point in this case therefore is : Must the party taking a bond divulge to the surety the fact that the agent about to be employed was formerly indebted to said party about to take the bond, when no inquiry was made by the person intending to become a surety ? We think that the authorities are to the effect that no such obligation rests upon the obligee of the proposed bond. If such obligation did rest upon the obli-gee of such bond, the obligee would not be able to determine what facts he should communicate and what facts were immaterial. We find the following in Brandt on Suretyship, § 419: ‘ Where it was agreed between principal and creditor that a guaranty for part of the debt should be surrendered upon a new guaranty being executed, and this fact was uot communicated to the party signing the new guaranty, it was held that he was not thereby discharged. The court said that the concealment, in order to discharge the guarantor, must be fraudulent. If it were otherwise, ‘it would be indispensably necessary for the bankers to whom the security is to be given to state how the account has been kept, whether the debtor was punctual in his dealings, whether he performed his promises in an honorable manner; for all these things are extremely material for the surety to know. But unless questions be particularly put by the surety to gain this information, * * * it is quite unnecessary for the creditor to whom the suretyship is given to make any such disclosure.5 ’5 The quotation in Brandt is from North British Ins. Co. v. Lloyd, 10 Exch. 523.

We also find the following in 2 Brandt, on page 611, note 4: “In Roper v. Trustees, 91 Ill. 518, it is held that if a person, knowing another to be utterly insolvent, propose to credit him if he will procure sureties, he is not guilty of fraud by failure to inform the surety of the insolvency of his principal; but aliter if he use an artifice to throw the surety off his guard, or deceive him.”

So, in the case at bar, if Crittenden & Tucker had not paid the insurance company, and were unable to pay, it may be said that they were insolvent, and, under the authority of the Illinois case, the company was not obliged to communicate that fact to the surety, when no inquiry was made, and when no artifice was used by any one to deceive the proposed surety. Again, it is said in Wilmington, etc., R. R. Co. v. Ling, 18 S. C. 116: “That if the plaintiffs knew when the bond was given that their agent was in default, and indebted to them in his pre-existing agency, and yet concealed this fact, and held him out to the sureties as trustworthy, either expressly or impliedly, such conduct would be a fraud upon the sureties, and would make void the bond as to them. ’ ’ Applying this decision, we find that in the case at bar the insurance company did not conceal the fact of Crittenden’s former indebtedness, and did not hold him out as trustworthy. The subject was never mentioned between Bartlett and the agent of the insurance company who acted in the premises. See, also, La Rose v. Logansport Nat. Bank, 102 Ind. 332; 1 N. E. 805; Home Insurance Co. v. Holway, 55 Iowa, 571; 8 N. W. 457; Remington Machine Co. v. Kezertee, 49 Wis. 409; 5 N. W. 809; Home Machine Co. v. Farrington, 82 N. Y. 121; Bostwick v. Van Voorhis, 91, New York, 353 ; Booth v. Storrs, 75 Ill. 438; Graves v. Lebanon Nat. Bank, 19 Am. Rep. 50; Brandt on Suretyship, §§ 419-422.

We are therefore of opinion that under these decisions there was no error in the ruling of the district court.

The plaintiff in this case is a foreign insurance corporation. It is admitted by the pleadings that the plaintiff had not filed in the offices of the secretary of state and the county recorder the papers designated in Chapter 24, Division 5, Compiled Statutes 1887, and also in the act of March 8, 1893, and that, therefore, the contract of this bond could not be enforced by the plaintiff. But that contention of the appellant has been decided adversely to him in the case of the State v. Rotwitt, 17 Mont. 41; 41 Pac. 1004.

The judgment and order denying anew trial are affirmed.

Affirmed.

Hunt, J., concurs. Pemberton, C. J., not sitting.