Nat'l Bank of N. Hudson Atunion City v. Nat'l Suretyco

• Citation: 144 A. 576
• Decision Date: 04 February 1929
• Docket Number: No. 66.,66.
• Parties: NATIONAL BANK OF NORTH HUDSON ATUNION CITY v. NATIONAL SURETYCO.
• Court: New Jersey Supreme Court

144 A. 576

NATIONAL BANK OF NORTH HUDSON ATUNION CITY

v. NATIONAL SURETYCO.

No. 66.

Court of Errors and Appeals of New Jersey.

Feb. 4, 1929.

Appeal from Supreme Court.

Action by the National Bank of North Hudson at Union City against the National Surety Company. Judgment for defendant, and plaintiff appeals. Affirmed.

William L. Rae, of Jersey City, for appellant.

Isaacs & Gunther, of Jersey City, and Julius Lichtenstein, of Hoboken, for respondent.

WALKER, Chancellor. The Supreme Court entered judgment upon the order of Hon. Henry E. Ackerson, the Supreme Court commissioner, who heard the motion to strike out the complaint, reached the conclusion that it should be granted, and entered an order that the complaint be struck out with costs, and that plaintiff-appellant have 10 days in which to file an amended complaint, if it is desired so to do; but, instead, it appealed from the judgment after the expiration of the 10 days. There is but one question presented by this record, and that is whether the bond of indemnity in question was a single one limiting the defendant's liability to $100,000, or was, in effect, a new bond given each year upon the payment of additional annual premiums, answerable for defalcations occurring within each particular year.

Counsel for plaintiff-appellant urges that the bond of a surety company insuring a bank against fraud or dishonesty of a cashier, if susceptible of two constructions, one favorable to the bank and the other favorable to the insurance company, will be given a construction most favorable to the bank, if it was prepared by the surety company. This is inapplicable, because here no two such constructions may be given to the contract; it is susceptible of but one, and that favorable to the defendant-respondent. The plaintiff-appellant also contends that a bond, which by the payment of premiums for one year is kept in force by renewal from year to year, is, in effect, a separate contract for each year of renewal, and binds the surety company to indemnify for losses in any one of such years; but in this case the bond was not for one year with privilege of renewal, but was one entire bond for such term as it should be continued by the payment of annual premiums. This appears plainly from what it says, namely, that in consideration of the premium of $812.50 the bond was to run "for a period of one year from the date thereof and of subsequent annual premiums," etc. While the general rule may be that a renewal of fiduciary policy or bond constitutes a separate and distinct contract for the period of time covered by such renewal, here the bond by its terms was not renewable, but was written for an indefinite period, subject to the payment of annual premiums, as is an ordinary life insurance policy.

Stress is laid by counsel for plaintiff-appellant upon the case of Ætna Casualty & Surety Co. v. Commercial Bank (D. C.) 13 F. (2d) p. 474. In that case the bond provided that in consideration of an annual premium the plaintiff was bound to pay defendant such pecuniary losses as it should sustain of money or other personal property, through the fraud, dishonesty, theft, embezzlement, etc., of any dishonest or criminal act or omission of the cashier. The bond expressed a penalty of $10,000. And it was held that "the court prefers to find as he believes the facts clearly indicate, that each year's premium was to buy one year's insurance of $10,000. There is no fact or circumstance warranting a finding that the parties intended that the first year's premium bought insurance of $10,000, but that the three years' premiums bought insurance of only $3,333,1/3 per year," and, further: "Courts in which an opposite conclusion has been reached have grounded their decisions upon a finding that the parties by their contract evidenced an intention to restrict the liability to one penalty without regard to the number of premiums paid. The court has discovered nothing in this record to warrant such finding." Now, this court is in accord with those tribunals which have reached a conclusion that bonds like the one in this case come within the doctrine just quoted in the opinion in Ætna Casualty & Surety Co. v. Commercial Bank. In our judgment the parties to the bond before this court have evinced an intention to restrict the liability of the contract to one penalty without regard to the number of premiums paid.

On November 9, 1916, the defendant-respondent issued to the plaintiff-appellant a blanket bond by way of protection against dishonesty on all the employes of the bank, the material provisions of which are as follows:

"In consideration of the premium of Eight Hundred twelve and 50/100 ($812.50) Dollars paid by The National Bank of North Hudson, West Hoboken, N. J., hereinafter referred to as the insured, to the National Surety Company, hereinafter referred to as...