United States Fidelity & Guaranty Co. v. Hughes

• Citation: 40 F.2d 34
• Decision Date: 14 April 1930
• Docket Number: No. 196.,196.
• Parties: UNITED STATES FIDELITY & GUARANTY CO. OF BALTIMORE, MD., v. HUGHES.
• Court: U.S. Court of Appeals — Tenth Circuit

40 F.2d 34 (1930)

UNITED STATES FIDELITY & GUARANTY CO. OF BALTIMORE, MD., v. HUGHES.

No. 196.

Circuit Court of Appeals, Tenth Circuit.

April 14, 1930.

N. A. Gibson, of Tulsa, Okl. (Joseph L. Hull and West, Gibson, Sherman, Davidson & Hull, all of Tulsa, Okl., on the brief), for appellant.

George B. Schwabe, of Tulsa, Okl., for appellee.

Before LEWIS, COTTERAL, and PHILLIPS, Circuit Judges.

LEWIS, Circuit Judge.

This is an appeal from a judgment for $10,000, the full amount named in a bond in which appellant as surety for William Carl Lauer agreed to indemnify the First National Bank of Kiefer, Oklahoma, Lauer's employer, and to "make good and reimburse to the said employer such pecuniary loss as may be sustained by the employer by reason of the fraud or dishonesty of the said employee in connection with the duties of his office or position, amounting to embezzlement or larceny." The bond further provided: "That should the employee become guilty of an offense covered by this bond, the employer will immediately on being requested by the surety to do so, lay information before a proper officer covering the facts and certifying the same as required by law, and furnish the company every aid and assistance, not pecuniary, capable of being rendered by the employer, his or its agents and servants, which will aid in bringing the employee properly to justice, and such action when required of the employer shall be a condition precedent to recovery under this bond."

The claimed breach of the bond is that Lauer, president of the bank, on October 9, 1925, withdrew $6,500 in currency from the Exchange National Bank of Tulsa on account of the Kiefer bank and deposited it in the First National Bank of Tulsa to the credit of the Farmers' National Bank of Beggs, Oklahoma, and for which the Kiefer bank did not receive anything in return; also that Lauer on February 1, 1926, caused the Exchange National Bank to charge the account of the Kiefer bank with $8,000 and place that amount as a credit to the Beggs bank in the First National Bank of Tulsa. The Kiefer bank received nothing out of this transaction, and its books did not show either of said transfers of funds until some time after the transaction. Lauer received no compensation, profit, or benefit from these transfers of his bank's funds. He caused them to be made at the request of one R. E. E. Steglieder and for his accommodation, in the belief or hope that Steglieder would reimburse the Kiefer bank. Steglieder owned approximately fifty per cent. of the capital stock of the Kiefer bank, and he seems to have controlled and dictated its management and policy. Because of these transfers and other acts of Lauer as the bank's president prior thereto for the benefit of and to accommodate Steglieder the bank became insolvent, was closed early in March, 1926, and a receiver was appointed. He brought this suit. After the $6,500 transaction Steglieder and his brother put some notes in the Kiefer bank. They went into the bank's assets and were found to be worthless. They also turned over to the bank other notes shortly before it closed, which Lauer said were to be used to straighten out the bank's affairs and balance its books. They amounted to more than $30,000 face value, but their real value does not appear.

Appellant assigns error that the court directed a verdict for plaintiff; and counsel for appellant presents two points in support of the assignment, (1) the acts of Lauer on October 9, 1925, in transferring the $6,500, and on February 1, 1926, in transferring the $8,000 amounted, in neither transaction, to "embezzlement or larceny," hence neither constituted a breach of the obligation of the bond, and (2) if those terms (embezzlement or larceny) are to be taken in their broad generic sense, meaning loss to the bank through fraudulent or dishonest conduct on the part of Lauer but not amounting to embezzlement or larceny, then the bond was not in force at the time of the two transfers of the bank's funds, because of an express condition of the bond to be hereinafter considered.

1. On the first proposition the adjudications are not in harmony, some holding that the words "embezzlement or larceny" do not limit or qualify the preceding words "fraud or dishonesty of the said employee," that the proof need not show or tend to show that the employee was guilty of either crime, that embezzlement and larceny should be taken in their generic sense — meaning any financial loss sustained through the fraud or dishonesty of the employee. This view seems to be supported by Delaware State Bank v. Colton, 102 Kan. 365, 170 P. 992; Green v. United States Fidelity & Guaranty Co., 135 Tenn. 117, 185 S. W. 726; Rankin v. United States Fidelity & Guaranty Co., 86 Ohio St. 267, 99 N. E. 314; Champion Ice Mfg. & Coal Storage Co. v. American Bonding & Trust Co., 115 Ky. 863, 75 S. W. 197, 103 Am. St. Rep. 356; City Trust, S. D. & S. Co. v. Lee, 204 Ill. 69, 68 N. E. 485. In the Champion Ice Mfg. & C. S. Co. Case, it was said that the words embezzlement and larceny were used as generic terms to indicate the dishonesty and fraudulent breach of any duty or obligation upon the part of the employee. However, the court said in that case that the dishonest and fraudulent conduct of the employee constituted an act of embezzlement. In some of the cases just cited the courts were apparently impressed with the conceded rule that where there is ambiguity in an insurance policy it is to be resolved against the party who prepared it, the insurer. But we see no occasion for the application of that rule. There is no uncertainty or ambiguity in the terms used in this bond. The two words used, designating crimes, are familiar in the terms of the law, they have a settled definite meaning, and we know of no principle that would justify us in deleting them. Opposed to the rule announced in the cases above, are Guarantee Co. v. Mechanics' Sav. Bk. & Tr. Co. (C. C. A.) 100 F. 559; Dominion Trust Co. v. National Surety Co. (C. C. A.) 221 F. 618, Ann. Cas. 1917C, 447; Ætna Indemnity Co. v. J. R. Crowe Coal & M. Co. (C. C. A.) 154 F. 545; Milwaukee Theater Co. v. Fidelity & Casualty Co., 92 Wis. 412, ...