
    Bryant v. The American Bonding Company.
    
      Bond for faithful discharge of duties by public officer — Application introduced as evidence — Becomes part of bond — Bond to run from year to year — Mutual consent necessary to continuance— Officer refuses to assent — Premium not recoverable — Liability on bond ceases.
    
    1. A bond procured by a state officer to be issued by a bonding company to the state guaranteeing the faithful performance of duty by such officer, which is in terms indefinite as to duration, will, in the absence of any stipulation to the contrary, be regarded as remaining in force during the incumbency of such officer on his present term, and where the consideration for such bond moving from the officer to the company is the payment in advance by the officer of a specified annual premium, he will be liable to the company for such payment during the term for which the company is liable to the state on the bond.
    2. But where, in a trial to recover against the officer for an annual premium, the application is introduced in evidence by the company as constituting in part its right of recovery, that instrument becomes a part of the bond, and if its language, taken in connection with that of the bond, imports that the bond is to run indefinitely, one year at a time, providing payment of the annual premium is made, the contract will be treated as continuing only upon the condition of mutual assent by the parties, and if such assent is not had, the officer will not be liable to the company in such action.
    3. Because of the refusal by the officer to assent to a renewal and his refusal to pay an annual premium, the obligation of the company under the bond to the state for future conduct of the officer does not attach.
    (No. 10021
    Decided November 19, 1907.)
    Error to the Circuit Court of Wood county.
    The controversy originated in á suit before a justice of the peace. In its bill of particulars the plaintiff below, The American Bonding Company, of Baltimore, Maryland, alleged its corporate capacity and its authority to transact business in Ohio. It further alleged that June 16, 1903, the defendant, Edward S. Bryant, as colonel of the second regiment Ohio National Guards, made application to the plaintiff for a bond in the sum of $4,000, to run indefinitely, for an annual premium of twelve dollars; that defendant paid the first annual premium, and that at the end of one year an annual premium became due on said bond and application, which defendant has refused to pay, and asking judgment for the same and costs.
    By answer the defendant admitted the corporate capacity and right to do business in Ohio of the plaintiff; admitted the making of the application and the issuing of the bond and denied that the bond might be renewed and continued except upon mutual agreement between plaintiff and defendant ; admitted that he. paid the annual premium for the year ending June 16, 1904, and alleged that prior to the above date he notified the plaintiff that he did not desire a renewal and did not agree to such renewal or continuance of the bond after that date.
    The justice found for the defendant. Motion for a new trial was overruled and a bill of exceptions taken. On error to the common pleas by the Company the judgment was affirmed. These judgments were reversed by the circuit court, that court holding that the justice erred in overruling the motion for a new trial. Defendant below brings error. Further facts, bearing upon the issues, will be-found stated in the opinion.
    
      
      Mr. Wade H. Ellis, attorney general; Mr. W. H. Miller; Mr. C. R. Painter; and Mr. George H. Jones, for plaintiff in error.
    Bonds made by surety companies are insurance policies. People, ex rel., v. Fidelity & Casualty Co., 153 Ill., 25.
    The business of guaranteeing the fidelity of persons holding public or private places' of trust, and the performance by persons, firms and corporations of contracts, bonds, recognizances and other undertakings is “guaranty insurance.” People, ex rel., v. Rose, Secy., etc., 174 Ill., 310; 1 Joyce on Insurance, Section 12; Standard Dictionary, “Insurance”; Tebbets et al. v. Guaranty Co., 73 Fed. Rep., 95.
    The almost unbroken line of authority sustains the proposition that insurance contracts are to be construed favorably to the applicant or insured and against the insurer.
    With reference to guaranty bonds executed upon a consideration, and by a corporation organized to make such bonds for profit, the rule of construction applied to ordinary sureties is not applicable. The bond is in the terms prescribed by the surety, and any doubtful language should be construed most strongly against the surety and in favor of the indemnit), which the insured had reasonable ground to expect. Supreme Council Catholic K. of A. v. Fidelity & Casualty Co., 63 Fed. Rep., 58; Surety Co. v. Pauly, 170 U. S., 144; 2 Am. & Eng. Ency. Law, 2d Ed., 460.
    The application of plaintiff in error was for a bond that might run for an indefinite time, but such time was limited by the further provision that in order to continue to be alive it required each year a renewal by the parties.
    A renewal is generally held to be a new contract, upon the terms and conditions stated in the policy expired — the old application, in the absence of evidence to the contrary, serving as the basis of the new contract, and as if made at the date of the renewal. May on Insurance, Vol. 1, Section 70.
    The agreement to renew must be clear as well as complete. Loose and informal conversations between an agent and an insured will not bind the insurer. It must appear that the parties intended' to make a renewal agreement and understood that they had perfected the agreement. O’Reilly v. Assurance Co., 101 N. Y., 575; Mallette v. Assurance Co., 91. Md., 471; Taylor v. Insurance Co., 47 Wis., 365; Croghan v. Underwriters’ Agency, 53 Ga., 109; Giddings v. Insurance Co., 90 Mo., 272; Insurance Co. v. Beatty, 119 Pa. St., 6; Insurance Co. v. Walsh, 54 Ill., 164; King v. Insurance Co., 58 Wis., 508; Scott v. Insurance Co., 53 Wis., 238.
    From the foregoing authorities it must be conceded that in order that a contract of the kind in suit may be renewed, that each party to such contract must have agreed to the renewal.
    When plaintiff in error so notified the defendant company that he would not agree to a continuance of the- policy and refused to pay the premium for another year, the contract was determined.
    The renewal of the insurance bond depended upon two things, the payment of the premium by the plaintiff in error, and its acceptance by the defendant in error.
    There is no condition either in the application, agreement or bond that unless notice is given, that there is no intention to renew, that such bond or policy is renewed. Guarantee Co. v. York et al., 3 Hurl. & Norman Eng. Exch. Rep., 588; Guarantee Co. v. Froane, 7 Hurl. & Norman Eng. Exch. Rep., 3.
    An examination of the application made by plaintiff in error discloses that his proposal was that such insurance policy or bond was subject to renewal, one year at a time, and the policy or bond requested is only a continuing one' in the sense that it is good for one year, but may be continued indefinitely from year to year, if the parties mutually are willing. Fidelity & Casualty Co. v. Lawler et al., 64 Minn., 144; De Jernette v. Fidelity & Casualty Co., 33 S. W. Rep., 828 Insurance Co. v. Walsh, 54 Ill., 164; Brady v. Insurance Co., 11 Mich., 425.
    In contracts of life iusurance, it has been considered that the annual premium not being paid, to authorize a recovery, something must have taken place subsequently between the parties, which would amount to a new contract. Scott v. Insurance Co., 53 Wis., 238; Want et al. v. Blunt, 13 East., 183; Acey et al., Exrs., v. Fernie, Secy., 7 Meeson & Welsby’s Rep., 150; Insurance Co. v. Ruse, 8 Ga., 534.
    In the last case decided, it was held that, the receipt of premium and other acts might be proper evidence of a new renewal contract between the parties; see also Buckbee v. Insurance, A. & I. Co., 18 Barb., 541.
    If there is a failure to pay at the time when by the terms of the policy it is to be paid, the risk is at an end. Robert v. Insurance Co., 1 Disney, 355, 2 Disney, 106; Insurance Co. v. French et al., 2 C. & S. C, 321, 30 Ohio St., 240.
    We believe it has been shown that if the transaction out of which this action is claimed to have 'arisen is that of an application for and the issuance of an insurance bond, that plaintiff in error had the option of refusing to renew such insurance bond or policy at any of the yearly stated periods referred to in the application, and that there could be no continuation of said insurance bond without mutual assent and action of the parties thereto.
    In considering the relations between plaintiff in error and defendant in error as fixed by the application and their agreement, considerable light is thrown upon their status by various courts in construing leases. Giaggiano v. Giallorenzi, 57 N. Y. Supp., 2; Salomon v. Weisberg, 61 N. Y. Supp., 60; Halloway v. Schmidt et al., 67 N. Y. Supp., 169; Pugsley v. Aiken et al., Exrs., 11 N. Y., 495; Doe v. Porter, 3 T. R., 15; Burton on Real Property, 277; Doe v. Dixon, 9 East, 15; Goodnight v. Richardson, 3 T. R., 462.
    
      Mr. Earl D. Bloom and Mr. Edward Beverstock, for defendant in error.
    The general rule is that the duration of the bond to secure faithful performance of the duties of an office is co-extensive with the 'duration of such office. 5th Cyc., 773; South Carolina Society v. Johnson, 1 McCord, 41; 10 Am. Dec., 644; Poole v. Cox, 9 Iredell’s Law, 69; 49 Am. Dec., 410.
    In the case at bar here under consideration, inasmuch' as the plaintiff in error continues to exercise the duties of his office, we think the bond continues in force, and the company would be liable for any default made by the plaintiff in error; and if it is liable, then the plaintiff in error must pay the premium.
    The defendant in error became surety upon a contract not of its own making, but one that was stipulated and provided for by the party benefited — the State of Ohio.
    The courts in construing the liability under these circumstances have stated with approval the rule of construction relating to ordinary surety, whether entered into gratuitously or for a valuable consideration. Surety Co. v. Cement Co., 9 Kan. App., 8; 57 Pac. Rep., 237; State, ex rel., v. Hill, 88 Md., 111; 41 Atl. Rep., 61; Archer v. State, 74 Md., 443; 28 Am. St. Rep., 261; 22 Atl. Rep., 6; Savings & Loan Assn. v. Fidelity & Guaranty Co., 197 Pa. St., 177; 46 Atl. Rep., 910; United States v. Bonding & Trust Co., 89 Fed. Rep., 925; 32 C. C. A., 420; United States v. Surety Co., 92 Fed. Rep., 549; 34 C. C. A., 526; Cowles v. Fidelity & Guaranty Co., 98 Am. St. Rep., 844.
   Spear, J.

By the bill of exceptions it appears that at the trial the plaintiff introduced in evidence the application and the bond. It was thereupon admitted by the parties that prior to June 16, 1904, defendant notified the Company that he did not desire a renewal of the bond; that the defendant was and still is colonel of the second regiment, Ohio National' Guards, and that he has given no bond since the giving of the bond in question; that his term of office has been continuous, and that the defendant is required by the laws of Ohio to give bond to the state for the .faithful performance of his duties. No other or further evidence was offered.

One of the grounds for new trial was that the finding and judgment of the justice was against the weight of the evidence; but the record presents simply a question of law, and no duty of weighing evidence devolved upon the circuit court. Nor are we here called upon to give construction to the statute of the state with reference to the duties of a colonel of an Ohio regiment with respect to the property of the state, or otherwise, or his duty with respect to the giving of a bond of the character here shown, the admission of the record being that such officer was, by the laws of the state, required to give bond for the faithful performance of his duties; and no further reference to the statute is here necessary, except to say that the claim is made by plaintiff in error that the statute does not give to the colonel of a regiment the custody or control of the property of the state enumerated in the bond, nor of the public funds therein mentioned, and that the bond in these respects was prepared under a misapprehension of -the Company’s real liability with respect to the official conduct and responsibility of the officer; and while the statute requires some sort of a bond of the colonel of a regiment, it does not require the character of bond imposed by the Company on the officer in this instance. Because of this error, it is insisted, the premium required is far in excess of an amount adequate to insuré the actual risk incurred; and this fact may account for the officer’s disinclination to renew the bond.

The question presented, therefore, is: What is the legal effect of the bond, taken in connection with the application, each paper being an essential part of the transaction between the parties?. Both having been introduced in evidence by the Company, we are relieved of consideration of the query, which might otherwise arise, whether or not the application is part of the bond, for the act of the Company in basing its right of recovery in part upon that instrument, incorporates it for all the purposes of the case. As tersely stated by counsel for the defendant in error, the concrete question is: Is the plaintiff in error liable to pay a premium at the end of the first year, if he continues in office and gives no other bond, or is he absolved from such payment on giving notice, before the expiration of the year, that he does not desire a renewal of the bond? The justice and the common pleas answered that he was not so liable; the circuit court answered that he was. The contention of counsel in support of the judgment of the circuit court is, in brief, that this being a surety bond guaranteeing the faithful discharge of his duties by an officer, of necessity must be coextensive with the duration of such office. Hence, as Colonel Bryant has been, and'still remains such officer, the Company is bound to the state to make good its guaranty, and this continuing obligation implies necessarily the yearly payment of the premium by the officer; otherwise the Company would be subject to loss without corresponding consideration or benefit accruing to it. As a proposition at large, this statement will be assented to, because if the contract, when properly construed, imposes a continuing liability, the duty to pay premiums would seem to follow. But the question remains, What is the proper construction of this contract? And first, what is the nature of the contract? Is it one simply of suretyship, one of those known as voluntary contracts, or is it rather one of the class issued for a money consideration and because of a desire for pecuniary gain? If the former, then it is one wherein the surety is regarded as a favorite of the law, and all doubtful questions to be resolved in his favor; if the latter, then he is regarded as an insurer, whose contract, being drawn by the surety himself, and for a money consideration, is, if ambiguity exists in the language, to be resolved most strongly against the surety. Supreme Catholic Knights of America v. Fidelity & Casualty Co., 11 C. C. A., 96; Mechanic's Savings Bank & Trust Co. v. Guarantee Co., 68 Fed. Rep., 459; Cowles v. U. S. Fidelity & Guaranty Co., 32 Wash., 120. Manifestly, the simple fact that a premium is paid by the officer establishes beyond question that the contract does not belong to the former class.

Coming now to an examination of the contract — the application for the bond and the bond itself — we find that the applicant, in consideration of the issuing of the bond, agrees to pay the Company an annual premium in advance of twelve and three dollars (though why the latter sum is named does not appear), and binds himself, his heirs, etc., to indemnify the Company against all loss, etc., resulting from his default, etc., which the Company may sustain by reason of having executed said bond, or any renezval or continuation thereof. The application contains this further significant clause. To the question to be answered by the applicant respecting the duration of the bond, “How long to run?” the answer is, “Indefinitely, one year at a time, renewed.” And the character of the risk, as given' in the application, is: “Faithfully discharge duties of office of colonel of 2d Infantry, O. N. G.” No other clause of the application in any way qualifies these statements. The bond is as follows:

“Know all men by these presents: That we, Edward S. Bryant, as principal, and The American Bonding Company, of Baltimore, as sureties, are held and firmly bound unto the State of Ohio, in the penal sum of four thousand dollars ($4,-000.00), for the payment of which, well and truly to be made, we jointly and severally bind ourselves, our heirs, executors and administrators firmly by these presents. Sealed with our seals, and dated this 16th day of June, 1903.
“The condition of the above obligation is such, That, whereas, the said Edward S. Bryant, who is commandant of 2d Infantry, Ohio National Guard, has, as commandant of said regiment, been intrusted with property of the State of Ohio, including all ordnance stores, clothing, camp and garrison equipage, in possession of said organiza•tion, together with public funds coming into his hands as such officer, arid for such state property and funds as may hereafter be issued or placed in his charge as said commanding officer. Now, if the said property or public funds, or either, shall be delivered to the said Edward S. Bryant, and the same shall be safely kept and at all times in readiness for immediate úse, in a place appropriate for that purpose, and no part of the said ■ public property permitted to be used or taken from such place of deposit for any other purpose than for the use and benefit of such organization or other lawful public service; and if said property and funds shall be turned over to his successor in office (first causing new bonds to be executed by his successor, to the acceptance of the adjutant-general), or shall be returned to the state 'in good condition, and shall at all times be subject to the orders of the governor of Ohio, then this obligation shall be void; otherwise to be and remain in full force and virtue in law.
“Edward S. Bryant. (Seal.)
“American Bonding Companv of Baltimore.
“(Seal.)”

The bond was deposited with the adjutant-general of the state.

It will be noted that there is no definite term stated for the duration or life of the obligation. That feature is left entirely to inference. It therefore cannot be determined in this case, except by reference to the application. There are three parties to the contract — the applicant, called in legal parlance the “risk”; the state and the Company. The consideration moving to the Company from the “risk” is the annual premium-to be paid. The bas'is of the right of the state under the contract might rest upon the principle of a contract made for its benefit by another, which it has accepted; but it can also rest upon the further consideration of the employment by it of the officer, such employment giving also to the state the control of the conduct of the officer. The state, under these facts, being a party to the contract, reaping advantage from it, should be held to have had knowledge of the entire contract, and to have accepted the indemnity subject to any infirmities attaching to the transaction. In other words, it would take cum onere. . Then what follows ? The applicant, the “risk,” could not be heard to claim that the bond would remain in force after his refusal to pay the premium, and it is difficult to see how the beneficiary, the state, could successfully make that claim. One thing is certain: The contract is, as to duration, at least ambiguous. The bond contains no express declaration on the subject, and the application, as hereinbefore recited, justifies the understanding by the applicant that its continuance depended upon a'renewal at the end of the year by the payment of the annual premium; and it is hardly conceivable that the Company, when it accepted the application and issued the bond, in good faith supposed that it was to be bound during all the years that the officer might serve as colonel, when at the same time the annual premiums, the basis of its contract, were not being paid, and that its only recourse would be to resort to an action to recover. The contract is silent as to the party who may exercise the option to continue or terminate the contract; but clearly, if such right belongs with'anyone, it must belong to the one who has procured the contract and is obliged to pay the premiums.

It is not necessary in this case to carry the rule respecting insurance contracts as far as it has been held in many reported cases. It is sufficient to apply to the contract the modified rule, clearly recognized in this state, viz.: that where clauses of such a contract are susceptible of two interpretations, which seem equally fair, that should be preferred which is least favorable to the company; but, like other contracts, they should receive a reasonable construction in order to carry out the presumed intention of the parties as expressed by the language used.

We are of opinion, therefore, • that a bond of this character, indefinite * as to duration, will, standing alone, be held to remain in force during the incumbency of the officer on his present term, and the officer will remain liable for the payment of annual premiums so long as liability to the state on the bond continues. But where the application has beeri made a part of the bond, as in this case, and its language taken in connection with that of the bond imports that while the bond may run indefinitely, but one year at a time, and continued providing the annual premium is paid, the contract should be regarded as continuing only upon the condition of mutual assent, and if such assent is not had, the officer will not be liable for the premiums. And, further, that in case the officer refuses to assent to a continuance of the contract, liability for future conduct of the officer does not attach.

These conclusions require that the judgment of the circuit court should be reversed and the judgment of the common pleas affirmed.

Reversed.

Shaucic, C. ]., Price, Crew, Summers and Davis, JJ., concur.  