Monongahela Coal Co. v. Fidelity & Deposit Co. of Maryland

• Decision Date: 23 May 1899
• Docket Number: 817.
• Citation: 94 F. 732
• Parties: MONONGAHELA COAL CO. v. FIDELITY & DEPOSIT CO. OF MARYLAND.
• Court: U.S. Court of Appeals — Fifth Circuit

94 F. 732

MONONGAHELA COAL CO. v. FIDELITY & DEPOSIT CO. OF MARYLAND.

No. 817.

United States Court of Appeals, Fifth Circuit.

May 23, 1899

Under a bond for indemnity given on behalf of an employee appointed as agent for the sale of merchandise on commission, which by its terms declares that its true intent and meaning are that the surety "shall be responsible for moneys, securities or property diverted from the employer through fraud or dishonesty on the part of the employee," proof that on a settlement of accounts between them there was an indebtedness from the employee to the employer is not of itself sufficient to authorize a recovery by the employer against the surety as such indebtedness may have been authorized by agreement between the employer and employee, or by their course of dealing, and may have been incurred without any fraud or dishonesty on the part of the employee.

This is an action brought by the plaintiff in error against the J. B Donnally Company, Limited, and the defendant in error, on a bond of insurance or indemnity. The said plaintiff in error had judgment against the J. B. Donnally Company, Limited, for $6,634.15; but the circuit court directed a verdict for the defendant in error, and judgment was rendered in its favor. Whether or not the court erred in directing a verdict for the Fidelity & Deposit Company of Maryland is the question for consideration here.

The petition, leaving out formal parts, is as follows:

'First. That on the 10th day of March, 1896, it entered into a contract of agency with said defendant (the J. B. Donnally Company, Limited) to sell Pittsburg coal of plaintiff in the state of Louisiana upon the terms, under the conditions, and for the commissions set forth in the agreement thereof, made part hereof; same expiring on the 31st of December, 1896. Second. That said contract was in writing, renewed for one year to the 31st day of December 1897, as per renewal thereof annexed hereto as part hereof. Third. That, during the course of the business relations so existing between petitioner and said defendant, certain lots of coal were sold by said defendant, the proceeds thereof collected for account of petitioner by said defendant, and not paid over, and same amount to the sum of six thousand six hundred thirty-four and 15/100 dollars, with six per cent. per annum interest from the 1st October, 1897, as will more fully appear by the statements annexed as part hereof. Petitioner further represents that demand has been made upon said defendant for the payment of said sum aforesaid, without avail. Your petitioner further represents that the Fidelity & Deposit Company of Maryland, a corporation created under and by virtue of the laws of the state of Maryland, and a citizen of said state, domiciled at Baltimore, Maryland, and having a legal representative and doing business in this district, did, by its bond No. 30,901, in consideration of the premium therein expressed and paid, bind and obligate itself unto your petitioner, in the sum of ten thousand dollars, that it would save, defend, and keep harmless your petitioner from and against all loss and damage whatsoever, of any nature or kind, and from all other legal costs and expenses, direct or indirect, incidental thereto, which petitioner shall or may at any time sustain or be put to in the premises, and against all and any pecuniary loss sustained by petitioner of moneys belonging to petitioner, in the possession or custody of the said J. B. Donnally Company, Limited, of New Orleans, or for the possession of which it is responsible, under their contract of agency, and renewal hereinbefore set forth, which said bond is signed on the 20th of March, 1896, for a period of time of one year expiring the 20th March, 1897, and which bond was continued in full force and effect thereafter, for due consideration paid, for one year, to the 20 March, 1898, all of which will more fully and at large appear by reference to said bond and said continuation certificate, hereto annexed and made part hereof. Petitioner further represents that the amount so due and owing as aforesaid by the said J. B. Donnally Company, Limited, is a loss sustained under and by virtue of the terms and provisions of the bond, and the continuation thereof aforesaid, and has been duly demanded of the said Fidelity & Deposit Company of Maryland, which company has heretofore declined payment thereof.'

The defendant's answer was a general denial, and an averment that it was not liable on the bond, except for pecuniary loss caused by the larceny or embezzlement of the employe, the J. B. Donnally Company, Limited; that the respondent was discharged from liability on the bond by reason of a false certificate given by the plaintiff that it had examined the books of the employe, and found them correct, etc.

The bond sued on is as follows:

'Whereas, the J. B. Donnally Company, Limited, New Orleans, Louisiana, hereinafter called the 'employe,' has been appointed to the position of agents, in the service of the Monongahela Coal Company, Pittsburg, Pennsylvania, hereinafter called the 'employer,' and has been required to furnish a bond for his honesty in the performance of his duties in said position; and whereas, the employer has delivered to the Fidelity and Deposit Company of Maryland, a corporation of the state of Maryland, hereinafter called the 'company,' certain statements and declarations relative to the duties and accounts of the employe, the manner of conducting the business of the employer, and other matters, which, together with any statements or declarations hereafter required by or lodged with the company, do and shall constitute an essential part and form the basis of this contract: Now, therefore, in consideration of the sum of seventy-five and 00/100 dollars paid as a premium for the period from March twentieth, 1896, to March twentieth, 1897, at 12 o'clock noon, and upon the faith of the said statements and declarations as aforesaid by the employer, it is hereby agreed and declared that, subject to the provisions and conditions herein contained, which shall be conditions precedent to the right on the part of the employer to recover under this bond, the company shall at the expiration of three months next after proof of a loss, as hereinafter mentioned, has been given to the company, make good and reimburse to the employer to the extent of the sum of ten thousand dollars, and no further, all and any pecuniary loss sustained by the employer of moneys, securities, or other personal property belonging to the employer in the possession or custody of the employe, or for the possession of which he is responsible, directly occasioned by larceny or embezzlement on the part of the employe in connection with the duties of the office or position in the service of the employe hereinbefore referred to, as the same have been stated in writing by the employer to the company, and occurring during the continuance of this bond, and discovered during said continuance, or within six months thereafter, or within six months from the death or dismissal or retirement of the employe from the service of the employer within the period of this bond, whichever of these events shall first happen: provided, always, that said company shall not be liable by virtue of this bond for any mere error of judgment or injudicious exercise of discretion on the part of said employe in and about all or any matters wherein he shall have been vested with discretion either by instruction or rules and regulations of the said employer. And it is expressly understood and agreed that the said company shall in no way be held liable hereunder to make good any loss that may accrue to the said employer by reason of any act or thing done or left undone by the said employe in obedience to or in pursuance of any direction, instruction, or authorization conveyed to and received by him from said employer, or its duly-authorized officer in its behalf; and it is expressly understood and agreed that the said company shall in no way be held liable hereunder to make good any loss by fire, robbery, theft, or otherwise that said employer may sustain, except by the direct act or connivance of the said employe. The following provisions also are to be observed and binding as a part of this bond: That

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