Thomas v. Western Indemnity Co.

Statement of the Case. Through its agent in El Paso, Tex., the Western Indemnity Company was engaged in the business of executing bonds as surety for a moneyed consideration. Appellant, W. N. Thomas, being desirous of operating a jitney motor bus in the city of El Paso, and before doing so it being required of him by city ordinance to file a bond, he approached the appellee's agent with a view of getting the indemnity company to execute the bond as surety, whereupon its said agent gave to Thomas an application blank to be filled and signed by him.

The parts of this application which appertain to the points at issue are:

"Whereas, the undersigned was on the 1st day of April, 1917, granted a permit by the city of El Paso, Tex., to operate a motor bus within the limits of the city * * * in compliance with the terms of an ordinance, * * * and before a license can be issued there must be filed with the city clerk of the city of El Paso a bond in the sum of $1,000: Now, therefore, application is hereby made to the Western Indemnity Company to execute said bond as surety, which bond, if executed, shall continue in force and effect for one year from the date thereof, unless canceled by the Western Indemnity Company. * * * The applicant will pay the company $150 per year, payable in 12 equal installments, monthly in advance, and said entire premium shall be paid in any and every event, save, only, if the Western Indemnity Company shall itself cancel said bond, in which event there shall be no premium liability against the applicant for the remaining term of said year from the time of said cancellation. The Western Indemnity Company shall have the right at any time, at its option, to cancel its bond and to withdraw therefrom as surety, upon releasing the applicant from any further liability for premium."

Pursuant to this application being signed by Thomas and presented to the agent of the company, the required bond was executed, as required by the city ordinance, by the company. The consideration to the company for so signing as surety the note sued on was executed by Thomas. It contains the following stipulations:

"For value received * * * I promise to pay to Western Indemnity Company * * * the sum of $150. * * * This note is payable as follows: In monthly installments of $12.50 each; the first of said installments being due and payable one month after date, and the remainder of such installments being due and payable one on the 1st day of each month thereafter, etc., and the failure to pay any of the installments shall mature the entire amount of the note."

Dated February 13, 1917.

Thomas paid on the note $31.25, being for the balance of the month of February and all of March, and on the 1st of April notified the company's agent to cancel the bond, and filed another bond with the city, with different surety.

This suit was filed by the Indemnity Company May 28, 1917, for the balance due upon the face of the note, interest, and attorney's fees, etc., and for foreclosure of chattel mortgage on an automobile. Thomas answered, first, that the contract, for which the note evidenced the consideration, was a contract of indemnity from month to month, that it had been terminated on the 1st day of April by notice, and by filing a new bond with the city, with a different surety, and that therefore there was no consideration for the part of the note sued on; second, that the contract was null and void as to either party beyond the period of 30 days, because it lacks mutuality, is unilateral, etc., and subject to be terminated by either party.

Trial without a jury, and judgment rendered for the Indemnity Company for the balance of the note, interest, and attorney's fees, from which Thomas has appealed.

Opinion. The question presented by the assignments is: Did the trial court "err in not holding as a matter of law that Thomas was not bound for the payment of the balance due, according to the face of the note sued on because the contract was unilateral?" Construing this contract as a whole, as we are required to do, we have concluded that the clause in the contract providing that the "bond shall continue in force for one year unless canceled by the Western Indemnity Company, makes it terminable at the will of either party, and therefore unenforceable for any period except that for which the company had received the money. Appellee urges that when, in response to the application, the company signed the bond, it had done all it was required to do under the contract, and that it thereby became executed, the consideration perfected, and that payment for that reason can he enforced. If the act of signing the bond as surety had been all the company was to do under the contract, this well-settled principle of law would support its judgment. But it will be noted that by the contract relied upon the company binds itself to keep the bond in force and effect for one year, unless it chooses to cancel it, and there were ten months of the time yet to elapse before all that was to be done could have been done; so it is clear that the principle cannot be applied to the facts of this case. If the company had by its contract bound itself to keep this bond in force for one year in all events, then even a part payment by Thomas would have perfected the consideration. M., K. T. Ry. Co. v. Smith, 98 Tex. 47, 81 S.W. 22, 66 L.R.A. 741, 107 Am. St. Rep. 607, 4 Ann.Cas. 644.

The writer is of the opinion that, construing the two writings together, the application and the note, it is clear that the company only bound itself to keep the bond alive or in force for one month at a time, and from month to month only as Thomas paid in advance the monthly charge of $12.50 per month. Justice WALTHAL does not concur in the latter proposition.

We are of the further opinion that, by the clause in the contract reserving to the company the right to at any time cancel the bond, the contract was unilateral, and terminable at the will of either party, and that by Thomas giving notice as he did, and filing another bond with the city, the contract was terminated, and the Indemnity Company could and should have withdrawn from the bond; therefore the indemnity company has no cause of action for the unpaid portion of the note.

Reversed and rendered.