U.S. Fidelity & Guaranty Co. v. First Nat. Bank of Fort Morgan, 19549
| Decision Date | 14 August 1961 |
| Docket Number | No. 19549,19549 |
| Citation | 147 Colo. 446,364 P.2d 202 |
| Parties | UNITED STATES FIDELITY AND GUARANTY COMPANY, Plaintiff in Error, v. FIRST NATIONAL BANK OF FORT MORGAN, a National Banking Corporation, Defendant in Error. |
| Court | Colorado Supreme Court |
Hodges, Silverstein, Hodges & Harrington, Denver, for plaintiff in error.
Geo. A. Epperson, Donald F. McClary, David L. Roberts, Fort Morgan, for defendant in error.
We will refer to plaintiff in error as Guaranty Co. and to defendant in error as the Bank.
The action was commenced by the Bank against Guaranty Co. and the prayer of the complaint was that judgment enter in favor of the Bank for the sum of $2,604.71 allegedly due under the terms of a bond issued to it by Guaranty Co. This bond covered the Bank (among other matters not here pertinent) against the following losses:
'(E) Any loss through the Insured's having, in good faith and in the course of business whether for its own account or for the account of others, in any representative, fiduciary, agency or any other capacity, either gratuitously or otherwise, purchased or otherwise acquired, accepted or received, or sold or delivered, or given any value, extended any credit or assumed any liability, on the faith of, or otherwise acted upon any securities, documents or other written instruments which prove to have been counterfeited or forged as to the signature of any maker, drawer, issuer, endorser, assignor, lessee, transfer agent or registrar, acceptor, surety or guarantor or as to the signature of any person signing in any other capacity, or raised or otherwise altered or lost or stolen, or through the Insured's having, in good faith and in the course of business, guaranteed in writing or witnessed any signatures, whether for valuable consideration or not and whether or not such guaranteeing or witnessing is ultra vires the Insured, upon any transfers, assignments, bills of sale, powers of attorney, guarantees, endorsements or other documents upon or in connection with any securities, obligations or other written instruments and which pass or purport to pass title to such securities, obligations or other written instruments; * * *'. (Emphasis supplied.)
The facts are not in dispute; essentially they are as follows: Between August 31, 1956, and October 1, 1956, the Bank loaned one George Q. Hood a total of $13,613.24. Hood was engaged in the oil well service business. The loans by plaintiff were secured by the assignment by Hood of accounts receivable, evidenced by invoices representing goods delivered and services performed. Hood assigned in writing, among others, four invoices totalling $2,604.71 purporting to represent goods and services which never were furnished to the persons named therein as debtors. These invoices were prepared by Hood and assigned to the Bank with intent to defraud. Hood became insolvent and the Bank suffered a $2,604.71 loss for which it claimed indemnity from Guaranty Co. under its bond. The Bank claims that the invoices were forgeries and counterfeit within the meaning of the bond. Guaranty Co. denies that they were forgeries or counterfeit within the meaning of the bond or otherwise.
The trial court found that the invoices admitted in evidence showed, '* * * a sale of goods, and services rendered by George Q. Hood to the customers, when in fact no such goods or services were ever rendered.' It further found that, '* * * said invoices were falsely made and made with intent to defraud the plaintiff,' and concluded that the invoices in question were '* * * forgeries within the meaning and intent of the bond or are counterfeit within the meaning of the intent of the bond * * *.' Judgment entered as prayed for by the Bank, and Guaranty Co. seeks review by writ of error.
Where a borrower obtains money from a bank and as security for the repayment thereof assigns invoices for services and materials purporting to have been supplied to customers when in fact no such services or materials were ever supplied, the invoices being fictitious but regular in form and appearance, and the pretended customers nonexistent, and on the faith of such false and fraudulent invoices the bank advances money on the security thereof and suffers loss as the result of the fraud, may the bank recoup its loss against a guarantor pursuant to the terms of a bond which insures against losses occasioned by acceptance of '* * * securities, documents or other written instruments which prove to have been counterfeited or forged as to the signature of any maker, drawer, issuer, endorser, assignor, * * *'?
The question is answered in the negative. It is argued by counsel for the Bank that the pertinent language of the bond was prepared and offered by a compensated surety company; that if that language is susceptible of two constructions, one of which is favorable to the Bank and the other to the bonding company, that interpretation which is most favorable to the Bank must be adopted if consistent with the objects for which the bond was given. It is assumed that an ambiguity appears on the face of the bond because of the use therein of the phrase 'securities * * * which prove to have been counterfeited or forged as to the signature of any maker, * * *.' It is argued that we should construe the phrase to provide coverage in the instant case. We are not unmindful of the rule which requires that ambiguous language in an insurance contract must be most strongly construed against the person who prepared it. This well-established rule is stated and discussed at some length in American Surety Co. v. Pauly, 170 U.S. 133, 18 S.Ct. 552, 42 L.Ed. 977. The opinion contains a number of citations of authority which we need not include here. However, we cannot overlook the equally well established principle that an insurance carrier or indemnitor against loss cannot be held liable beyond the scope of risks which have been clearly covered in its contract.
We find no ambiguous language in the contract here in question. In determining the rights and liabilities of parties to a written contract, the language used therein must be construed in harmony with the plain and generally...
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