United States v. Hartford Accident & Indemnity Co.

• Decision Date: 10 February 1941
• Docket Number: No. 172.,172.
• Parties: UNITED STATES v. HARTFORD ACCIDENT & INDEMNITY CO.
• Court: U.S. Court of Appeals — Second Circuit

117 F.2d 503 (1941)

UNITED STATES v. HARTFORD ACCIDENT & INDEMNITY CO.

No. 172.

Circuit Court of Appeals, Second Circuit.

February 10, 1941.

Valentine J. Sacco, Asst. U.S. Atty., of Hartford, Conn. (Francis M. Shea, Asst. Atty. Gen., Robert P. Butler, U.S. Atty., of Hartford, Conn., and Leavenworth Colby, Atty., Department of Justice, of Washington, D.C., on the brief), for the United States.

Walfrid G. Lundborg, of Hartford, Conn. (Shipman & Goodwin, of Hartford, Conn., on the brief), for defendant-appellee.

Before SWAN, CHASE, and CLARK, Circuit Judges.

CLARK, Circuit Judge.

In 1927, Frank K. Taylor, a veteran, applied for a duplicate of his adjusted service certificate, on the ground that the original had been lost, and, as required by statute, 38 U.S.C.A. § 649, gave a bond, with the defendant herein as surety, to protect the plaintiff against claims on the original certificate. After the duplicate had been issued, Taylor proceeded to borrow on it from plaintiff on four different occasions from 1927 to 1931. He then obtained final payment of the balance in July, 1936. Meanwhile, in 1930 and 1931, through other field offices of the Veterans' Administration, he procured loans from plaintiff on his original certificate, and in June, 1936, effected final settlement upon it. Not surprisingly his whereabouts is now unknown. Plaintiff made demand on defendant for reimbursement and brought this action when defendant refused payment. Trial was had upon stipulated facts, as a result of which the district court denied recovery because no intention was expressed in unequivocal terms in the bond to indemnify the obligee against its own negligence. D.C. Conn., 33 F.Supp. 859.

The statute cited requires a bond, "with condition to indemnify and save harmless the United States from any claim upon such lost or destroyed certificate." The bond itself is stated to be a "Bond of Indemnity to the United States * * * To secure the United States against payment of any sum whatsoever on account of the issuance of" the adjusted service certificate in question, identified by number, amount, and the veteran's name. The recitals in the bond refer to the occasion for its execution upon Taylor's loss of his original certificate and state that it is required by the Director of the United States Veterans' Bureau "by virtue of the World War Adjusted Compensation Act." From the condition of the bond, it appears that the obligors agree to repay plaintiff for sums it has paid "on account of the establishment of any valid adverse claim" to the proceeds of the original certificate and also to save plaintiff harmless from "any claim" and from "all damage, loss, costs, charges, and expenses" which plaintiff may sustain "or be liable for in consequence of any such claim," and "any and all costs and expenses incurred in connection therewith."¹

This inclusive provision in terms covers not only valid claims, but also any claims whatsoever, and any and all costs incurred in connection with any claims. Plaintiff suggests that the form of the bond thus including alternatively any valid claim and then any claim was adopted to guard against the contingency, among others, that an approval by the Veterans' Administration under 38 U.S.C.A. § 641 of the designation of different beneficiaries under the two certificates might be held final and binding upon the Government under 38 U.S.C.A. § 620. Butte, A. & P. Ry. v. United States, 290 U.S. 127, 54 S.Ct. 108, 78 L.Ed. 222, and United States v. Great Northern Ry., 287 U.S. 144, 53 S.Ct. 28, 77 L.Ed. 223, had so held as to certain determinations of the Interstate Commerce Commission. Under the view more recently stated in United States v. Bentley, 2 Cir., 107 F.2d 382, that the Veterans' Administration may correct errors in its determinations, this provision would no longer be necessary. But, whatever the history of the provision, the intent to cover different forms of liability is so clear that we see no justification for restricting it by reading into it something not there expressed. Particularly is this so when the claimed construction apparently takes away all substantial effect of the bond.

Defendant's theory is that the later language of the condition merely amplifies the first provision and therefore refers only to a valid adverse claim. In the companion case herewith, United States v. Continental Casualty Co., D.C.S.D.N.Y., 33 F.Supp. 65, this day reversed in 2 Cir., 117 F.2d 506, the court accepted that view, although the court herein rejected it for the view that the obligee's negligence was a bar. The arguments of defendants before us in both cases apparently tend to favor the former theory; these diversities of view perhaps illustrate the difficulties of rationalizing a restriction on the broad language of the bonds. A further difficulty arises because of the necessary concession that costs incurred by plaintiff in contesting an invalid claim are recoverable. Such a construction requires a discrimination in that the word "claim" used in the alternative part of the condition carries two distinct and different meanings.

To meet the point that the interpretation of the bond made below leaves it practically without effect, defendant asserts that a bank which has made a loan with a certificate as security, as provided in 38 U.S.C.A. § 642, may recover upon that certificate, even though it had already been cancelled. But we think the legal basis of that argument doubtful, and its persuasive force in any event limited. The statute, 38 U.S.C.A. § 643, provides that no certificate shall "be negotiable or assignable...