Fidelity & Cas. Co. of New York v. Bank of Timmonsville

Decision Date29 May 1905
Docket Number562.
Citation139 F. 101
PartiesFIDELITY & CASUALTY CO. OF NEW YORK v. BANK OF TIMMONSVILLE.
CourtU.S. Court of Appeals — Fourth Circuit

J. P K. Bryan and George H. Moffett, for plaintiff in error.

H. A M. Smith and P. A. Willcox (Mitchell & Smith and Willcox &amp Willcox, on the briefs), for defendant in error.

Before GOFF and PRITCHARD, Circuit Judges, and McDOWELL, District judge.

McDOWELL District Judge.

This was an action at law brought by the bank against the fidelity company, to be called the defendant. One Lechner, the cashier of the bank, fled in August, 1901. The statement of his defalcations filed in this case by the bank showed losses to the extent of $10,035.69. This action was based on a bond executed by the defendant, which was made on March 17, 1891 and was annually renewed, the last renewal covering the year from March 17, 1901, to March 17, 1902. The obligation of the defendant was to make good and reimburse to the bank, to the extent of $5,000, pecuniary loss sustained by the bank by reason of fraud and dishonesty on the part of Lechner. In the bond is the following clause: '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. ' Before delivery of the annual renewal contracts certain written or printed questions concerning Lechner were submitted to the bank for answer. The first of these found in the record was submitted in 1894. These questions differ somewhat in the different years. Answers to these questions were made by the president or the vice president. The purport of the questions of most importance in this case were whether or not Lechner was indebted to the bank and whether or not his books were examined. The evidence showed that the answers to the effect that he was not indebted to the bank were several times untrue in point of fact. But whether or not such misstatements were made with full knowledge and recollection of the true facts is not made entirely clear by the record. A detailed statement of the facts relating to the misstatements concerning Lechner would be profitless. We may say here, however, that we find no error in the action of the trial court in refusing to direct a verdict for the defendant on this ground.

In the certificates the date when the last examination of the books had been made is given. On such dates in several instances Lechner was apparently considerably indebted to the bank by note, and on some of these dates also by small overdrafts. The certificates were usually made some months after the date of examination of the books. Whether or not the untrue statements as to his indebtedness may have been the result of nonrecollection of inadvertence was under the evidence here peculiarly a question for the jury.

However, we are of opinion that the instruction given the jury on this point was erroneous. The learned trial court in effect instructed the jury that the bond was not avoided unless the misstatements were made with intent to secure renewals of the bond. If the misstatements in this case were made deliberately, with full consciousness of their falsity, it is rather difficult to conceive that they could have been made without an intent to deceive the defendant.

The Supreme Court in Claflin v. Assur. Co., 110 U.S. 81, at page 95, 3 Sup.Ct. 507, at page 515 (28 L.Ed. 76), quotes approvingly the following: 'Where one has made a false representation, knowing it to be false, the law infers that he did so with an intention to deceive.'

We are of opinion that the false answers made to the defendant's questions in at least some of the certificates were material, so much so that we are wholly unable to say that the bond would have been renewed had truthful answers been made. Certainly the contract between the parties did not leave it to the bank to determine the materiality of the answers. And a mere belief on the part of the president of the bank that it was immaterial whether the questions were answered truly or not did not make the answers immaterial.

However for the sake of argument, let it be conceived that the answers made in this case were made with full knowledge of their falsity, but with such belief of their entire unimportance that it could be said that they were made without any conscious design or set purpose to deceive the defendant. It is manifest that false answers made under such circumstances would be fully as prejudicial to the interests of the defendant as would be the same false statements made with specific design to deceive the defendant and thus secure renewals. Hence (if it be possible that one can make a false statement knowing it to be false and knowing that it will deceive, without an intent to deceive) it must be clear that the parties did not use the phrase 'willful misstatement' with intent that it should be construed as meaning a knowingly false statement made with design to...

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    ... ... St. Rep. 887; Penn. Mutual Life Ins. Co. v ... Mechanics Bank & Trust Co., 73 F. 653, 38 L.R.A. 33 ... The ... misstatement ... Calflin ... v. Ins. Co., 28. L.Ed. 76; Fidelity & Cas. Co. v. Bank of ... Timmonsville, 139 F. 101; New York Life Ins ... ...
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