Maryland Casualty Co. v. Bank of England

• Decision Date: 05 December 1924
• Docket Number: No. 6617.,6617.
• Parties: MARYLAND CASUALTY CO. OF BALTIMORE, MD., v. BANK OF ENGLAND.
• Court: U.S. Court of Appeals — Eighth Circuit

2 F.2d 793 (1924)

MARYLAND CASUALTY CO. OF BALTIMORE, MD., v. BANK OF ENGLAND.^*

No. 6617.

Circuit Court of Appeals, Eighth Circuit.

December 5, 1924.

Ashley Cockrill and H. M. Armistead, both of Little Rock, Ark., for plaintiff in error.

James B. Gray and G. E. Morris, both of England, Ark., for defendant in error.

Before STONE and KENYON, Circuit Judges, and KENNEDY, District Judge.

STONE, Circuit Judge.

This is an action by the Bank of England, Ark., against the Maryland Casualty Company of Baltimore, Md., upon a bond guaranteeing the fidelity of Mamie McKenzie as bookkeeper in the bank. Jury was waived. From a judgment in favor of the bank, the casualty company sues this writ of error.

The defense relied upon in the trial court was the breach by the bank of certain conditions of the bond which, it was claimed, released the casualty company from all liability upon the bond. The contentions here follow the same lines and take form around assignments of errors which relate to the refusal of certain peremptory and declaratory declarations of law and to certain portions of the law as declared by the court. These have to do with two provisions of the bond and the related warranties upon which the bond was issued. These two provisions of the bond are (italics ours) as follows:

"This bond is executed by the company upon the following express conditions, which shall be deemed conditions precedent to any right of the employer to recover hereunder;

"First: That the acceptance and retention of this bond by the employer shall be considered as conclusive evidence that the employer consents and agrees to all the terms, conditions and provisions contained herein, and all written statements made, or which at any time may be made by the employer, in connection with this bond, or any renewal thereof, are warranted by the employer to be true, and if any such statements shall be found to be untrue in any particular, or if the employer shall willfully suppress or mis-state any fact in making any claim for, or in proving any loss under this bond, then this bond shall become void and the company shall not be liable to the employer for any claim whatsoever made under or by virtue of this bond.

"Second: That the duties of the employee, the system of accounting, the safeguards established and the method of compensation shall all remain in accordance with the written statements, hereinbefore referred to; unless change therein shall be consented to, in writing, by the company."

The related warranties were contained in the "written statement" made prior to and in connection with the application for the bond. Those pertinent here are as follows:

"What will be the title of applicant's position? (a) Bookkeeper.

"Explain fully his duties in connection therewith. (b) Keep the books of bank, and assist teller.

"Will applicant authorize the loans and discount of the bank? (c) No.

"What salary will the applicant receive? $50.00.

"Will the applicant have access to the treasury of the bank? (a) Yes.

"If so under what restrictions? (b) None.

"In case of applicant handling cash or securities, how often will the same be examined and compared with the books, accounts and vouchers, and by whom? (a) Monthly.

"Will any examination of the applicant's accounts be made outside of the audit of the state or national bank examiners? (b) No."

This "statement" closed, above the signature of the bank, as follows:

"It is agreed that the above answers shall be warranties and form a part of, and be conditions precedent to the issuance, continuance or any renewal of or substitution for, the bond that may be issued by the Maryland Casualty Company, in favor of the undersigned, upon the person above named."

The evidence showed and the court found as follows:

"The evidence establishes, and the court so finds, that the only examinations made of the applicant's accounts, vouchers and books, during the entire time the bond and renewals were in force, were made by the state bank examiner, those for the years 1917, 1918 and 1919 only once a year, and since then twice annually, and there was no waiver by the surety company, if monthly examinations were required by the terms of the bond."

"The court finds that after the execution of the bond and while it was in force, the applicant was made, in addition to being bookkeeper and assistant teller, assistant cashier, and as such was authorized in addition to her duties as bookkeeper and assistant teller, to sign drafts and cashier's checks, and that this additional duty was not consented to in writing by the defendant."

Because of the above quoted provisions of the bond and the above showing of evidence and findings of fact, the casualty company contends as follows:

I. That the bond was breached by failure of the bank to make the monthly examinations required by its promissory warranty;

II. That the bond was breached by changing the duties of the employee in a way that added to the insurance hazard, without obtaining the written consent of the casualty company.

I.

There was in the trial court, and can be here, no question that there were no monthly examinations. Nor was there nor could there be any doubt that such omission would release the bond if the bond required such examinations to be made. The view of the trial court was as follows:

"That a failure of an absolute promissory warranty to make monthly examinations of the applicant's accounts will avoid the policy under provisions of a bond or policy, like the one in this case may be conceded, but was there such a warranty?

"Question 11 contains three questions, subdivision `A' two and subdivision `B' one. The questions in `A' read: `In case of applicant handling cash or securities, how often will the same be examined and compared with the books, accounts and vouchers, 2 — and by whom?' The first part of the questions is answered `Monthly.' The second is unanswered. Acceptance of the application and execution of the bond,...