First Nat'l Bank of East Islip v. Nat'l Sur. Co.

• Decision Date: 20 April 1920
• Citation: 228 N.Y. 469,127 N.E. 479
• Parties: FIRST NATIONAL BANK OF EAST ISLIP v. NATIONAL SURETY CO.
• Court: New York Court of Appeals Court of Appeals

228 N.Y. 469

127 N.E. 479

FIRST NATIONAL BANK OF EAST ISLIP

v.NATIONAL SURETY CO.

Court of Appeals of New York.

April 20, 1920.

Action by the First National Bank of East Islip against the National Surety Company. From a judgment of the Appellate Division, Second Department (182 App. Div. 262,169 N. Y. Supp. 774), affirming a judgment for plaintiff entered upon a verdict, defendant appeals.

Reversed, and complaint dismissed.

Hiscock, C. J., and Pound, J., dissenting.

Appeal from Supreme Court, Appellate Division, Second department.

Carlisle Norwood, of New York City, for appellant.

Oliver C. Carpenter, of New York City, for respondent.

COLLIN, J.

The action is upon a written instrument executed by the defendant, a domestic corporation, to the plaintiff, which guaranteed the honesty of an employé of the latter. At the close of the evidence at the trial the trial justice, denying, under exception, the motion of the defendant for a direction of a verdict in its favor, submitted the evidence to the jury, which rendered a verdict in favor of plaintiff. The consequent judgment was affirmed by the nonunanimous decision of the Appellate Division.

The facts determinative of the question presented to us are uncontradicted. The instrument, under seal, was delivered November 21, 1912. In virtue of it the defendant agreed ‘to make good’ to the plaintiff any loss not exceeding $10,000 which the plaintiff might sustain by reason of specified dishonest acts of a named employé committed after the 5th day of February, 1912, and ‘before the termination of this bond,’ provided the plaintiff shall observe requirements prescribed and immaterial to our consideration. It next provided:

‘The liability of the surety hereunder shall immediately terminate as to subsequent acts of the employé: (a) Upon discovery by the employer of any default hereunder by the employé; (b) the employé leaving the services of the employer; (c) thirty days after receipt by the employer of written notice from the surety of its desire to terminate same. Upon the termination of this bond by discovery of default, the premium paid thereon shall be deemed fully earned.’

Next is an immaterial paragraph which is followed by:

‘Any claim against the surety hereunder must be duly presented to the surety within six months after the date of the termination of the surety's liability hereunder for any reason, and no action or proceeding shall be brought hereunder unless begun within two years after the employer shall have given notice of such claim.’

There is no other material provision.

The insured period ended February 5, 1914, because the plaintiff did not provide for a further time by the payment of the premium. The employé committed prohibited acts of embezzlement between May 28, 1912, and December 23, 1913, which became first known to the plaintiff December 28, 1915, and made known to the defendant by the plaintiff January 6, 1916. May 10, 1916, the claim was presented to the defendant. The defendant denied any liability on the ground that the claim was not presented within the six months next following the cancellation of the instrument. The action was begun June 21, 1916. We are to determine whether or not the claim of the plaintiff was presented to the defendant within six months after the date of the termination of the defendant's liability under the instrument.

[3] Although the instrument denominates itself a ‘bond,’ it is a contract or policy of insurance. Insurance Law (Consol. Laws, c. 28) § 70, subd. 4; People ex rel. National Surety Co. v. Feitner, 166 N. Y. 129, 59 N. E. 731. A contract guaranteeing or indemnifying an employer against any breach of fidelity on the part of an employé is generally regarded as, and in the matter of interpretation is, a contract of insurance. The plaintiff asserts that ‘the date of the termination of the surety's liability’ under the contract was the date of the termination of the period within which an action must be commenced upon the contract, as prescribed in the statute of limitations. The defendant asserts that such date was that of the termination of the insured period. Each party in brief and argument brings to our consideration many judicial opinions relating to the rules of interpretation deemed applicable to the case. If the language of the contract relevant to the question to be determined were of uncertain or doubtful meaning, the rules applicable would not be far or difficult to seek. We are not to interpret where there is not reasonable doubt concerning what the parties really agreed upon.

The language before us in its clear and indisputable meaning excludes the assertion of the plaintiff. The language is:

‘Any claim against the surety hereunder must be duly presented to the surety within six months after the date of the termination of the surety's liability hereunder for any reason. * * *’

The termination of the ‘liability’ of the defendant sets the six months running. It is manifest that the presentation of the claim is to be made while the duty and obligation of the defendant to make good the losses constituting the claim exist. It would be idle and senseless for the plaintiff to present the claim after the obligation of the defendant to make it good had terminated. In real life parties do not enter into stipulations of such character. Ordinary sense and understanding refuse to accept the conclusion that the parties so agreed. If the language under consideration were, ‘Any claim against the...