negUgence as rendered itl.tCcountable to the plalntUf. But, the character of the. mortgaged property, the fact that it conilfated of live stock and farming implements, .by means of which was enabled to wor'k his farm, it cannot be admitted, we think, .that it the duty of the bank, under all circumstances, to' proceedtoforeclose the mortgage,whenever a single installment of the debt became pue, and was not promptly paid. The mortgagor probato discharge the mortgage debt by the sale of the products oflliafarm, which he shouldlSucceed in raising by the use of the mQrtgi'l-ged property.. He may .havehad no .other meallS of paying tile deijt. In case of a failure o.f crops, therefore, and under many othefH0J;l,ditions that maybe suppol!led"a prudent creditor would very have deemed it the partof defer foreclosing the and, to treat the mOrtgagor wi'Ul. some indulgence. If· the bank had taken possession of the Jl1,ortga,ged prpperty·QU ·Pecember 1, 18!;},Q, ari,d had proceeded to fOJ;'eclose tl;J:Epportgage at that time, such action o;n its part might in ,a total loss of the interest wbJch #Ie manuiacturin,g company tlleJl' pad in the Adamson notes, . and in theproperty which was pledged t,o SeCure the payment of the ·. stJ,me. But,be tbisas.Jt may, we thetrialcourt erred in. deelarlng asa matter of law that it was the duty of thebank,to have proceeded to collect the first andsecond ii).j>tallmentsof the mortgagor's debt as' they hecamedue, witlWut refere.n,ce to the mortgagee's financial condition at that tin,le,.aJ;ld without re1'eJ.\eJ1ce to the' consequeJ;lcel!l of SUch ,Instead of giving an instruction to that effect, we' are of the opini(;\n t.hat.th¢jury should have been left aCUberty to determine as a matter of fact, and in view of all the circumstances of the case which were by the testimony, whether the bank was guilty of in failing to mortgage at an earlier datEl... ,IUs Jl1,ost probable, we think, ,.t}iat the verdict which was rendered against :the defendant bankwa:s due to the action of the trial court in giving t1;1e aforesaid instruction. For the error committed ib giving the, same, the judgment is accordingly reversed; and tile case is remanded for a new trial. . .
FIDELITY'& OASUALTYCO. OF N'EW YORK T. CONSOLI'b.A.TED NAT.
(Circuit Court of Appel1ls, 'I'hird Circrtlt.
FOR EMPLOYE·. "
A bank employe's bond, conditioned for the reimbursement of any loss sustained by reason of fraud or dishonesty in with his duties, provided' tbat any claim under the bond should embrace' and cover oniy acts, and.defaultscommitte,d during its currency, au(j, within 12 months next the date. of discovery of the act or default upon which such claim walYbased. Held, that the bond did not cover a default committed more than 12 months 'prlor to its discovery, which would, however, han been discovered within a year from its: commission had not such dil!'· covery been prevented by the act of the employ6 in falsifying the bQOks during the year preceding the discovery. 67 Fed. 874, reversed.
FIDELITY & CASUALTY 00. V.CONSOLIDATED NAT. BANK.
In Error to the Circuit Court of. the United States for the Eastern District of Pennsylvania. Richard P. White, for plaintiff in error. John G. Johnson, for defendant in Before ACHESON and· DALLAS, Circuit Judges, and WALES, District Judge. DALLAS, Circuit Judge. "The demand of the plaintiff below was . founded upon a bond as follows:
"No. 45,074. $14,000. "This bond, made the thirtieth day of September, in the year of our Lord one thoUlmnd eight hundred ,and eighty-nine, between the Fidelity and Casualty, Company .of hereinafter called the 'company,' of'the first pad, and Theo. E'. Baker, of Philadelphia, Pa., hereinafter called the 'employed,' uf tbe second part, and Oonsolidation National Bank, herein" after called ,the 'employer,' of the third part. Whereas, the employed has been appointed paying teller in the .service of the employer, and has applied to the compal1Y for the. grant by tham;of this bond, .now, in consideration' of the ,sum ,of seventy and:'!>0!loe dollars, as a premium for the term ending on the, thirtieth day, of September, eighteen hundred, and ninety, at 12 o'clocl!; noon, iUs hel'eby, declared and>agreed that during such term, or any S\lbseq,uent renewal of such term, and subject to the provisions and conditions,herein contained, the company shall, at the ,expiration of three months next after proof satisfactory to the otlicers of a losS, as hereinafter men- ' tivued, make good and reimburse to the employer, to the extent of the sum of, fOUl;telJD. thousand dollllrs, ,and no further, such pecuniary loss, if any; as may be sustained bY, the emplo.ver by reaSOn of fraud or dishonesty of the, emploYed in connection with the duties referred to, or ' the duties to Which, in the employer's service, he may be subsequently appointed or assigned by. the employer, which has been committed during the continuance of the said ter,m. or ,any renewal thereof, and discoveredduling said continuance, or witlJ,in six months thereafter,and within six months ·from the death, dismisliial"or of the employed: Provided, that,@I1 the discovery of any s,uch fraud or' dishonesty, as.aforesaid, the employer '.shall immediately give notice thereof to the company, and that full particulars of any claim m;;rde. under this bond shall be given in writing,addressed to the secretary of the, company at its otlice in the city of New York, within three months after such and ,the company shaH be entitled to call for, at the employer's expense, such reasonable particulars and proofs of the correctness of, claim as may be required by the otlicers, of the company, and to have tbe,same particulars, or any of them, verified by statutory declaration. ,And, ;upon the making (If any claim, this bond shall wholly cease and determine .as to acts subsequent to the date of making such claim, and shall be surrendered to the company on the payment of such claim. And provided, that the liability of the company under this bond shall not exceed the amount above written, whether the, loss shall have. occurred during the term above named, or during any continuance or renewal thereof,or partly during the said term, and partly during said continuance or renewed term. And provided, also, that if the employed shall become a defaulter under circumstances which may afford ground for the laying of a criminal information against .him, and for which the employer intends making, or makes, claim on the company, the employer shall, if and when required by the company or its. representatives, at the cost of the company, afford and render every information, evidence, aid, and assistance (not pecuniary) capable of being afforded by the employer,' either for the purpose of prosecuting, bringing to justice, ap.d convicting the employed for any criminal offense which may. be substantiated, or for the purpose of enabling the company to procure reim. bursement by the employed, or by his estate,of moneys paid by, or recoverable trom, tIre company, under this bond; and, also, that, if the employer
l!Ihall, at the date of this bond, or any time thereafter, be guarantied or hold any securities against loss co'tered hereby, the company shall only' be liable to make good any such loss ratably, and in just proportion, taking Into' account the value of such security. "This bond is issued subject also to the following conditions, Viz.: That if the company shall so elect, the liabiUty under this bond, or any renewal thereof, may be terminated at any time by notice in writing to the emploYl!r;and, in the event of such termination, the company shall, at the expiration of all liabiUties hereunder, refund the premium paid, less a pro rata part thereof for the time said liabllity shall have been in force. That any willful misstatement or suppression of fact by the employer in any statement or declaration to the company concerning the employed, or in any claim made under this bond, or a renewal thereof, renders this bond void from the beginning. during the continuance in force of this bond, or a renewal thereof, the right to make a claim thereunder shall cease. at the expiration of six months from the date at which the empioyed shall cease to be in the employ of the employer. That this bond, or. any· renewal thereof, w11l become void as to any claim which may arise subsequent to the occurreIice of any acton the part of the employed which may involve a loss for which the company is responsible hereunder to the empioyer of over one hundred dollars, If the employer shall .fail to notify the company of the same in writing immediately after the occurrence of such act shall have come to the knowledge of the employer. That this bond, or any renewal thereof, w11l also become void from the beginning if the employed covered hereunder has, within the knowledge of the said employer, been a defaulter at any time dUring his service. That any claim made under .this bond, or a renewal thereof, shall embrace and cover only for acts and. defaults committed during its currency, and within twelve months next before the· date of the discovery of the actor default upon which such claim is based. That any question as to the liability of the company to pay any claim under this bond shall, it the company require it, be referred to arbitration; the expense of such arbitration to be borne equally by the company and the claimant. That no suit or proceedings at law or in equity shall be brought. or arbitration reqUired, to recover any amount hereby insured, unless the same is commenced, and the process served, within the term of twelve months next after the discovery of any such fraUd or as aforesaid. And these presents witness that the employed hereby agrees to indemnify the company against any loss or damage it may sustain in consequence of such guaranty; and forthwith, after the coinpany shall have paid the employer, or any partner or partners, or other person or persons entitled to the same, any money under or by reason of such guaranty, to repay the company the amount so paid, and all other losses, damages, costs, charges, and expenses, it any, that the company shall in any way incur in consequence of stich guaranty. "In witness whereof, the said T. F. Baker (the employed) hath hereunto set his hand and seal, and the said company has caused this bond to be signed by Its president and secretary, and its seal affixed, on this thirtieth day of September, 1889. Wm. M. Richards, President. "T. F. Baker, The Employed. [Sea!.] "[Company's Seal.] Robt. J. Hillas, Assistant Secretary. "Signed, sealed, and delivered by the 'Employed' in the presence of "Name, R. M. Oberteulfer. "Address, 581 N. 3d. St. "Ex. w. Morris, Ent. W. 1fI."
This bond was regularly renewed and extended to September 30, 1894. Theo. F. Baker was guilty of fraud and dishonrsty, which was diseovered on January 10, 1894. Consequently the plaintiff in error was bound to make good to the defendant in error such pecuniary loss as it had sustained by reason of Baker's defaults, committed within 12 months next preceding that date. During that period he had embezzled ,$5,000, f?rWbich the liability of the plaintiff in error
FIDELITY &: CASUALTY CO. W. OONSOLIDATED NAT. BANK.
was and is admitted. He had also, during the same period, falsified the books and balance sheets of the bank, and the jury was instructed that:
"If this latter misconduct prevented discovery of previous embezzlements. and thus prevented the recovery. on this account. from the defendant, of money which it otherwise would have recovered, the plaintiff is entitled to recover the loss thus sustained during a period of twelve months preceding the time when such embezzlements would have been discovered but for this concealment."
This instruction is included among the errors assigned, and the controlling question in the case is whether the liability which it affirmed is one which had been assumed by giving the bond in suit. In other words, we are called upon to construe that instrument, to ascertain from the words used, and their relation to the facts, what, in this respect, was the intention of the parties in giving and accepting it. They certainly intended, for it was plainly said, that the bond should cover only acts and defaults committed within 12 months of the date of their discovery; yet the effect of the verdict which was rendered, and which was sanctioned by the chaJ:ge, was to extend the obligation to a default which, as we view the subject, was committed more than 12 months prior to discovery; for, with reference to this matter, the loss in the contemplation of the parties was, as appears to us, that which the bank sustained by reason of the fraudulent abstraction of its money, and not any damage which it may have suffered in consequence of the subsequent prevention of its recovery of that loss under this bond. Waiving any question as to whether such prevention of recovery constituted such a "pecuniary loss" as should be taken to be covered by the covenant for reimbursement, if that covenant were to be alone read and separately considered, we have, upon careful examination of the writing as a whole, been fully convinced that the covenantor's engagement cannot be so construed. 'Throughout the document, the frauds as to which indemnification is undertaken are so mentioned in connection with the subject of their discovery as to repel the assumption that steps taken for the avoidance of detection were themselves to be regarded as independent fraudulent acts, the commission of which would have the effect of extending the time allowed for discovery of the primary and principal (lefaults. One of the express conditions upon which the bond was issued, when understood as we think the parties must have understood it, absolutely forbids. that assumption. We refer to the provision that any claim made under the bond should "embrace and cover only for acts and defaults committed · · · within 12 months next before the date of the discovery of the act or default upon which such claim is based." What was in the minds of the parties when this condition was agreed to, and what did they understand it to mean? If, by putting ourselves in their place at the time they contracted, we can arrive at a satisfactory answer to this question, the case before us may be briefly disposed of. That the officers of the bank which accepted this bond, as well as those of the corporation which issued it, well understood the nature of the hazard to which it relates, may safely be assumed. They knew that the commission of fraud is generally supplemented by
vol. 71. "
for its concealment,and, that the teller of a bank who embezzles, its money is very likely to tamper with its accounts to prevent their disclosure of his wrongdoing. Can it be, then, that they intended that, if timely discovery shoul,d be prevented by such means, the prevelltion so occasioned would itself constitute a distinct basis of claim? 'To so interpret the condition would be to render it unavailing in the event of that being done which, as we have said, must have been foreseen., and which, there being no expression to the contrary, must have been regarded as, at least, one of the contingencies which might cause the condition to become operative. The manifest intent was to create a bar, and to the provision inserted for that purpose there cannot be annexed an exception or qualification not warranted by its terms, and the implication of which the circumstances of the case forbid. The object was to preclude liability for a number of defaults, extending over a longer period than one year, and yet the present claim is that, in addition to $5,000, the amount of the embezzlement-s within such period, the indemnifying company is chargeable with the amount of other embezzlements which had been committed during a prior term. We cannot sustain this demand, because to do so would, as we think, involve a misconstruction of the condition, and the defeat of its purpose. The bank's position rests upon the assumption that it would have recovered its earlier losses, by action upon this bond, but for the fraudulent postponement of their discovery. Let this be conceded, still it is obvious that seasonable discovery of the preceding dishonest acts would have rendered the perpetration of the succeeding ones impossible, and hence that the entire liability now asserted is one which could not possibly have accrued if discovery of the earlier embezzlements had been made within the prescribed time; and it is pot possible to hold, in the face of a condition limiting liability bya requirement of discovery, that, by reason of nondiscovery, the liability so limited was extended Or enlarged. ,The judgment of the circuit court is reversed.
LONDON & LANCASHIRE FIRE INS. CO.... STORRS·· (Circuit ,of Appeals, Eighth Circuit. December 2, 1!l95.)
Loss. An appraisement of ,the allount of the loss, made by persons appointed '!>Y the insurer a:nd the insured, is binding, though, the proceedings leadIng up ,to appointment and appraisement are not in strict accordance, r:equireml;lnts of thepoli,cY, since the parties are at liberty to waive', sItch reqUirements; and make, any laWful submission satisfactory to themselves.
pleadings, In an action, on an insurance polley, are such all not to ,alloW the jUry to, tind that the, v,alue of: the property destroyed wasgrea'ter than th!l:t fiXed by appraiserS, cannot complliln because 'the court wen'toutside the; IssueS by charging that, If the ailpralsemertt did ,not show the value of the jUry might ascer· tain. Itsvlllue, the ap-
,\ Rehearing denied January 20, 1890.