*1 SURETY SOUTHERN CO. v. MacMIL necessary apportionment relief NLA CO. equitably be- of the fund distribution which ig- No. 535. longed can we to the stockholders. Nor danger of Hermann’s nore the asserted transferring Appeals, Circuit. Circuit Court Tenth third money innocent April 12, 1932. rights if not de- impair, whose would Rehearing May 23, 1932. Denied rights beneficiaries’ and remedies. feat, ap- It is immaterial whether officer thus pointed special mas- be called a receiver or a appointment necessary to the ter. His remedy complete realization of the upon the possessed beneficiaries of the trust facts disclosed. Likewise, justification we see no for a jurisdiction clash of between the Dis- States District Court trict Wisconsin and the Western Probate Court County, Greene Mo. The latter court jurisdiction of the estate the deceased being ad- The estate which was Hermann. not be the ex- ministered could increased jurisdiction. Probate Court’s ercise executors succeeded to the estate of subject Hermann. That deceased estate liens, among being the bur- to certain them den in favor of the trust of the stockhold- ers. 28, USCA, title Section is in itself recognition appellees’ posi- an indirect if an tion. For action be continued against executors, it follows that the ex- subject ecutors took the estate to such re- rightly lief as directed the suit pending deceased Numerous cases he cited counsel died. conflicting jurisdiction recognize holdings priority rights of a appointed receiver by a court jurisdiction which first assumes over the res bearing have no here for the reason that the estate, brought which was jurisdic- into the County already tion Court, the Greene impressed with the m trust favor of the stockholders. disposition This appeal, is need- add, upon
less to based presented the facts by the record before us. appeal is from interlocutory order upon made a show- ing by affidavits. The trial on the merits
may change the fact situation so as to neces-
sitate new different findings respecting Hermann with the they purchased stockholders when the com- Nothing mon opinion stock. said in this presentation intended to foreclose the full and determination of that issue trial.
The order is affirmed.
5i2
PHILLIPS, Judge, dissenting. Circuit Pinson, Tulsa, (R. Paul Okl. Al- Underwood, len, I. J. Sam Canter- bury, Tulsa, Okl., on brief), all of appellant. McClelland, Jr., City, Bruce Oklahoma (Philip Pierce, Kneeland, Louie G. Okl. Bailey, all City, of Oklahoma Robert O. brief), appellee. Okl., on McDERMOTT, PHILLIPS and Before Judges, and KENNEDY, Circuit District Judge. 5á3 stipulated are: Judge. material On MeDERMOTT, facts Circuit in- June entered judgment of appellee recovered a of Okla- between state by appellant $17,890.66 upon bond issued supply homa, certain con- promptly, depository through a at Oklahoma Compa- *3 tract the Oklahoma Book between City, sale and dis- certain school books for ny was appellee was The trial and assured. years, at cer- tribution, period for a of upon stipulation as jury, without a and prices; agreed and further to main- tain principal er- evidentiary facts. The agencies of patrons tain accessible to the assigned denied de- ror is that the trial court throughout state. common schools judgment for on such facts. fendant’s motion specifically provides that the That contract petition alleged The hereafter contracts various terms be construed both as “shall to, referred and that the Oklahoma * * * covenants and as conditions Company $3,804.70 had failed to for account continuance of the contract.” sold, cash admittedly due for books and by $25,019.28 it, incorporated was This state contract of books delivered 18, 1924, company unsold, August in a contract of reported the book had reference plaintiff compa- disposed of; and that between the and the book but had ny. By contract, plaintiff agreed to de- given notice of such default defendant that was August company, August 8, September consignment, on to the book on and liver days quantity required prayer within 30 after notice of the the bond. necessary, $20,000, penal sufficient to meet the mar- sum of agreed to company ket demand. book admitted execution answer of the place through- points such sale at books on bond, alleged plaintiff but that had Oklahoma, per out cent, receive a and knowledge company book expenses discount for its services and complying contract, its with but embez- distributing books. com- such The book notify .zling funds; that it failed to the de- agreed: pany further fendant; shortages that all sued for part plaintiff acquired after knowl- of the second party arose such “Sixth: The edge;' agrees first its remit of the failure rights November, January, answering day first “the of this were on defendant thereby prejudiced year May and this each of this con- defendant March and thereby discharged payment has been and and in full for sale all tract, released nothing herein”; up day liable for first had de- books made them notice, October, February fendant been January, April, could have and re- liability. spectively, terminated further said its Defendant remittance to be accom- plaintiff alleges $6,918.- panied showing further received a statement total sales liquidation compa- prices 35 from the book at state and total sales contract ny, liability exchange prices. could not defendant’s any event, $13,081.65. exceed It is fur- reports accompany “Stock these alleged ther that the bond Au- terminated on reports quarterly stock statements these gust 1928, because the charter the book number of are to indicate the books on hand day; company expired on that it ac- depository and also the num- the central premiums cepted on the bond after that date agencies throughout ber'in the hands of the knowledge expiration without the State Oklahoma.” charter; that no exists on account company By paragraph book August 5, 1928, defaults because of responsible” “accountable and plaintiff thereof with- for all books delivered. days, prejudice. rep- its Plaintiff’s this con- secure the To lication denies that was aware that company and the defendant tract, the book faithfully perform- company was on; joined bond sued herein ing prior contract to the notice the de- its by reference; incorporated the contract fendant; receipt it admits dividend provisions of the pertinent bond are: alleges $6,918.35, that its net ex- loss “Now, condition of the above obli- bond; penal up- sum of the ceeded such, Principal gation that if the said expiration of the charter of the book faithfully part,, perform contract on its said company, charter was secured on Au- a new comply with and all sin- gust 1928, and the business carried obligations gular promises, and conditions of interruption; without had including custody safe expiration of char- said of the proper of all monies and remittance ter. many terms, per- spring days late, same, and shall of 1928 were according to obligations accompanied con- were form not then remittances promises, all the September, in full. MacMillan indebted- ditions laid $9,624.76 ness of by their had been for sev- the State of Oklahoma overdue bearing 1924, regarding 31, 1928, eral 30th, months. On October the book date of June keeping $3,624.76 indebted stock of on ac- sufficient adopted count preceding year’s texts to meet demands business. On render service in the distribu- November of in- satisfactory reconcilement obligation large tion be ventories same, disclosed a error the hook t-hen void; company’s hooks, growing remain in full force the dis- otherwise to out of honesty effect. employees; one of its and the hook acknowledged an indebted- Compa- “Provided, the MacMillan That *4 $10,000 ness in excess of more than its books ny ev- keep, each do and showed, acceptance for which a trade was ery, things singular all and the matters and given paid. time, At that the indebted- contract, to specified set in forth and ness, including acceptance, trade was by kept, The MacMillan done $16,340.15. detailing Without further performed exclusively at the times proof, company it discloses that the book spec- and in the as in said manner tardy reports had been in its and remittances ified: early delinquent that in it was Further, “Provided That in the event payment of substantial amounts conceded any part Principal, default of the owing delinquency in that the was letter, by registered written notice thereof $16,000 more than in re- the fall of with a verified statement the facts show- $3,804.70 by duced to May, 1929; and that ing such thereof, and the date default any delinquency notice of such giv- was sixty days within such mail- after default be August, en plaintiff until in Surety ed to Moines, in at office Des reported learned inventory of books Iowa. on hand was false. Further, Surety “Provided That The defendant contends that the bond may any obligation time terminate this was when the charter hook terminated giving thirty days’ regis- written notice company expired in 1928, relying upon the tered letter MacMillan Company to The analogy prin death of an individual obligation its desire to terminate this but cipal. ignorance Both in were prejudice any without claim for default expired; the fact that charter both con during the time in in bond was beyond tracted for term extending force, although may such default not have corporate A prompt life. new charter was been discovered when this bond was termi- ly secured, and the business maintained nated, refunding Principal in this interruption during days without the few pro bond the rata premium. unearned expiration between the the old Further, “Provided That the said granting of the new prejudice charter. No any shall not be liable ex- amount in any claimed, kind is even cir and the cess of the penalty of this bond.” cumstance of the charter expiring was an any No notice of default given- significance. without incident Illinois Sure August stip- defendant until It ty Co. v. John Davis U. S. plaintiff suspect any ulated did very closely S. Ct. 61 L. Ed. reports time, error in the made from time to point, and is adverse to defendant’s con July until tention. We think the bond not dis quarterly It did reports know that the were charged by this circumstance. many instances, made, made late and when principal defense to the bond accompanied were not a full remittance plaintiff failed to the de of amounts shown reports; due as fendant, agreed do, of as it defaults falling the book behind principal. urged, It is in its cash remittances in substantial force, cóntinuing bond, much amounts; delinquencies no notice such surety default, entitled know of defendant, agreed as was may take steps protect itself; so that May 1, 1926, bond. The due that, given, unless such notice is riv a small May 29, and full was made remittance did may ulet swell into a deep without stream accompany it, as the hook surety. a state warrant could stated that col- reports before June 10. The this, plaintiff lected düe To makes several answers.
5á5
only
It
of the default
applying
principal,
construes this
where
clause
tice
which,
expressly provides
made the basis of a bond
defaults
are to be
of tbe
surety company,
giving
claim
refers
is conditioned
of such
Many
of notice.
to the fact
statement
“verified
courts
held that
re-,
facts”
required by
surety,
clause is the usual
exonerate
quirement
proofs
clause
showing
prejudice.1
claim. The
absence of a
On the
Eighth
has,
cannot
so
other hand
limited.
Circuit
since the
default,”
can-
notice of
decision of National
“any
Long (C.
and we
Co. v.
Next,
change
A.)
887, consistently
it.
contends
125 F.
held
delinquency
provides,
has no
mere
the bond
be enforced.2
reference to
so
remitting
admittedly due,
many
amounts
That
in accord
deci
rule is
with the
involving wrongdoing,
Supreme
defaults
sions of
the United
Court
reports
language
false
But
holding
embezzlement.
company agreed
dates;
unambiguous,
remit
on stated
tbe courts will enforce the
failure to do
is default.
It is then claim-
County McCurley,
1 of Clark
School Dist No.
required only
ed that notice is
of substantial
53,
Bldg.
1916B,238;
92 Kan.
munity
142 P.
Ann. Cas.
Com
defaults;
if a
accom-
report,
Maryland Casualty
Co. v.
9) F.(2d) 678, a
panied
remittance,
but a
C.
ence
decision
full
was late
rendered in defer
Washington;
in the
settled law
state
day
so,
a reasonable construction
Hopkins,
Eilers Music House v.
838; Maryland Casualty
Wash.
P.
*5
make
of
trifling
notice
unnec-
such a
breach
(C.
v,
Co.
Fowler
C. A.
4)
F.(2d)
1375;
881,
31
63 A. L. R.
New Amsterdam
essary. But the
com-
defaults of the book
4)
Casualty
(C.
Shipping
Co. v.
S.
Board
C. A.
pany
amount,
were substantial
in
F.(2d) 847;
Empire Surety
16
Lakeside Land Co. v.
Co.,
shaw,
213,
431;
length
We
tinued
a substantial
of time.
105Minn.
117N. W.
Lackland
v. Ren
133,
314;
Indemnity
256 Mo.
S.
165 W.
Aetna
opinion
are
plaintiff
of
its
the
that
breached
24,
Comer,
676;
70
Co. v.
County
136
S. E.
Ga.
Van Buren
agreement by failing
notify
to
the defendant
Surety
Co.,
Iowa, 490,
v. American
137
Bross
115
24,
Rep. 290;
N.
olas,
126 Am. St.
W.
v. McNich
at least
existing
substantial defaults
42,
782,
1272;
1915B,
66 Or.
P.
133
Ann. Cas.
early
the
fall of 1928. The defendant
Beckner,
283,
&
Home Life Acc. Co. v.
168Ark.
270
529;
bad
it S. W.
notice;
Bonding
contracted to
such
receive
Dixie
Ins. Co.
v. American
384,
these,
430. It
162N. C.
78 S. E.
is contended that
right
know,
bad
might
a
to
that
have
it
distinguishable
continuing
are
cases
because no
li
steps
taken such
as it
be advised.
ability
If, however,
involved.
owner fails
surety
a
to
the
contractor
first de
come, then,
principal
We
dif-
faults,
may grow
the conditions
In
worse.
United
ficult question,
agreement
no-
Is
to
Guaranty
Gray,
Fid.
States
Co. v.
106 Okl.
&
233
the court stated:
“In
precedent
a
P.
the instant
tice
condition
is
liability,
to
or
case,
right
bonding company
if the
claimed
the
it
promise,
a concurrent
which
for breach of
the bond contract
under
notice
or
doubtful
may
liable for
uncertain,
quiring
damage
itself,
is
or if
bond
the
contract
while re
notice,
had been silent as
the
fail
effect
flow from the
Are
obli-
defendant’s
breach?.
give
rights
ure to
the notice would
on the
have
of-
gations under
abruptly
its
terminated
obligee,
undoubtedly
duty
the
of the court to
be
then would
it
be the
upon
adopt
give
or must
notice,
the failure to
that
construction which would
obligee.”
most
favorable to
prejudiced
show
al-
thereby,
that it
itas
2Maryland
England (C.
Bank
Cas. Co. v.
of
A. C.
leged in
answer?
defendant did not
its
F.(2d)
8)
793;
2
New Amsterdam Cas. Co. v. Cen
(C.
8)
203;
prove
F.(2d)
prejudice alleged,
undertake
ei-
tral Nat. Fire Ins. Co.
C.
4
A.
Iron
St. Louis Architectural
Co. v. New Amster
showing
ther by
practices
that
rules
(C.
8)
F.(2d) 344; Thompson
dam Cas. Co.
A.
40
C.
of
bad
were such
if notice
(C.
Surety
8)
of
v. American
New York
C.
42
A.
953; Odegard
v. General Cas. &
op-
received,
it would have exercised its
(2d)
(C.
8)
31;
Bldg.
C.
44 F.
Co.
A.
& Sav.
cancel,
way.
other
any
tion to
in
It
is
.
(C.
8)
Ass’n v. New Amsterdam Cas.
F.(2d)
C. A.
45
Co.
stipulated
989;
Fidelity
of
Dep.
Maryland
that
bad
Rice
&
v.
Co. of
(C.
427;
8)
C. A.
103 F.
National
Co. v.
inventory losses,
had
recovery
(C.
8)
Long
125 F.
A.
United States Fid.
&
herein;
knowledge was
delinquencies
Guaranty
8)
Co. v. Rice
C. A.
148F.
Whal
settlement,
in cash
had been reduced en v. Western
2)
Assur.
Toronto
C. A.
185
(C.
490; Metropolitan
Cas.
A.
F.
Ins. Co. v. Johnston
$16,000
$5,000
time
1928
at the
(accident
247 F.
7
L. R.
C. A.
po
175
insurance
was sent.
stands
notice
Defendant
licy)
; Knight
Castle,
172 Ind.
N.
proposition
give
(N. S.) 573;
failure
broad
27 L.
Gimbel
E.
Mitchell,
R.
Bros. v.
App.
Thomp
203Mo.
S. W.
In
obligations,
notice
whether it
terminated its
Surety Co., supra,
pro
American
the bond
son v.
true,
prejudiced or not. Whether
that be
obligation
“end,
should
with
date
vided
recoup
discovery”
principal’s
whether
is entitled
default. Our
court,
Guaranty
&
Fid.
own
damages
breach,
piv-
is the
suffered
Oklahoma,
F.(2d) 532, held
accord
with the
question
otal
in this case.
Thompson
great many
There are a
Case.
author
discharged
surety is
em
to his em
that a
where an
ities
divergence
sharp
There
au
is a
give
ployer
injury
fails to
notice of an
no-
give
ployee.
thorities as
of failure to
effect
event,
dis-
any
also,
made.3
we are
& Guaranty
contract
United States Fid.
Co. v.
Eighth
posed
Guenther,
S. 34,
follow
settled law the
281 U.
S. Ct
74 L.
Circuit,
parties
L.
Imperial
72 A.
R. 1064;
hold
Ed.
Fire
a condition
Insurance
giving
County,
made
Co. v. Coos
S.U.
company,
462, 14
failure
obligation
L.
Ct.
38 Ed. 231.
surety com-
give
such notice
relieves
thing
examining
bond,
the first
pany
liability.4
express provi
is that it contains “no
noticed
divergence
opinion
in cases
exists
declaring
sion in
the bond
shall be void
express-
agreement
give
notice is
where the
prior
give
if the notice
misconduct
is not
ly
liability
condition of
a
in
n.”5 *7Considering the
with which
care
surety company,
apt
for that
words used
drawn, the absence
surance contracts are
expressions
purpose. No
cus-
one
significant.
a
such common
is
used
tomarily
point
language
next
used is
worthy
note
bond;
found in
shall be
generally
a
“notice
promise,
used in
incorporated in
contracts,
in a
mailed,”
generally used
not that
apt
language
bond,
did use
to create
be) mailed.”
(or
“if notice
with
condition. We
therefore confronted
are
para
all four
thing
is that
next
noticed
construction, Did
bond,
the condition
graphs, after
notice, as
intend
phrase “Provided”
introduced
automatically
agreed,
terminate
ob-
should
urged
strongly
Further.”
It
“Provided
ligation under
Or did
intend
the bond?
that to introduce
term a
breach
promise,
was a
designate that
“provided”
the word
plaintiff liable
render the
of which should
not-
liability,
term
condition on
as a
damage
thereby?
occasioned
contrary
intent
promise, unless
writing
Su
itself.6 The
determined from the
In an effort
ascertain the intent
preme
to the matter
has adverted
Court
language
to a
*6
language:
following
the
by them
and
studied,
should he
terms
fairly
an
'proviso’
that the word
taken in
ordi
“It is trae
ought
plain,
to be
their
law
common
constitute a
popular
ap
This
one to
nary,
and
rule is
sense.
will,
not the
this is
as to
in a deed
hnt
plicable
contracts of insurance
condition
to it
meaning attached
invariable
other contracts. Chase v. Business Men’s fixed and
the eon-
On
(C.
F.(2d)
in
instruments.
10)
34,
C. A.
51
law these
Assur. Co.
the
cited. The
of liberal con
eases therein
rule
opin
5
Judge
language
quoted
Lewis’
is from
in
Hughes
insured does not
struction
favor
the
Guaranty
Co.
&
v.
Fid.
ion in United
(C.
F.(2d)
did,
10)
34,
37. That
how
the
A.
40
C.
play unless a fair construction
come into
express condition;
ever,
an
make
(cid:127)the contract
the intent
leaves
raised,
squarely
point
because notice
not
required.
question was not
in East &
said,
in doubt. This court
West
in
misconduct
367,
Co.,
6
40
I.
Trust
R.
Co. v. Union
Ins.
Haven, Conn.,
Fidel,
v.
49
Ins. Co. of New
375; Ormsby
1917F,
1010,
Phenix
v.
A.R.L.
100 A.
F.(2d) 35,
“But
that a
Rust,
38:
it is
301;
true
72,
Co.,
Brewer v.
N. W.
S. D.
Ins.
20 Okl.
5
58
Shipley
776,
233;
In
Jacob Tome
v.
P.
95
in
construction
he resorted to
strained
condition)
(held
(N.
;
520,
stitute,
a
200
58 A.
99 Md.
ambiguity
order to
an
which does
establish
410;
Caw,
Y.)
3 Barb.
Southern
v.
Robertson
924,
790,
ambiguity
Derfler, 73
force an
do not
exist. Courts
So.
v.
Fla.
75
Colonization Co.
744;
Tuttle, Day (Conn.)
Wright
1917F,
4
v.
L. A.R.
insurer.”
order to
an
resolve it
in
App.
County,
313;
Tex.
Kaufman
27
Civ.
De Vitt v.
in
Judge
Sanborn,
Walter H.
Standard Life 332,
224;
Blackmer,
Atwater,
409;
Rich v.
16 Conn.
S. W.
66
App.
11,
Coykendall
Y.
McNulty
Div.
146 N.
81
(C. C.
161
v.
Ins.
v.
A.
Accident
Co.
&
577,
970;
Cummings
631;
Lohr,
92
246
N. E.
v.
Ill.
S.
Paschall
ought
224, 226,
“But this rule
F.
said:
157
295;
Passmore,
Green,
Pa.
Forscht v.
v.
15
to make
464,
846,
effect
138; Nusly
Curtis,
permitted
have
36 Colo.
85 P.
v.
53 Pa.
7 L. R.
Rep.
592,
(N.
113,
S.)
Ann.
A.
118Am. St.
10
ambiguous,
then
plain
a
it
courts have said
while
1134. Other
Cas.
See,
insured.”
interpret
it in
favor
condition,
generally imports a
the entire contract
in
to determine
intent
order
must be looked
Smalley
3
Mechanics’, etc., Co.,
parties.
v. Ashland Brown-Stone
v.
183 U. of the
In Guarantee Co.
29;
124,131,
Co.,
72 W.
Boston Safe De-
L. Ed.
held
Mich.
N.
22 S.
46
114
Ct.
S.
472;
Thomas,
posit &
v.
59 Kan.
53 P.
could “be availed of to
Trust Co.
no rule of construction
518;
expressed
Lyon Hersey,
away
E.
Heas-
a
103 Y.
8 N.
terms of
with
N.
refine
ficient
suf
v.
398;
plain
Com’rs,
convey
meaning
Co.
20 Ind.
Trust
v.
clearness to
ton v. Board
App.
embodying requirements compli
parties,
201 Mo.
is underwritten meant; dition while on the "other obligee profit undertaken to insure the for a remedy per- there will be no secure on the against a failure of question, formance of the aet unless principal obligor. Such a contract words take words can effect as in favor interpreted liberally should be promise the contract contains because furthering the subcontractor, a view of render construction will performance, the object statute.” beneficent condition. create a words situation Williston deals with the Mr. stip- construe the are disinclined to ‘Courts stipulated that “re- where is presented, here *8 a precedent, ulations of contract as conditions a ports made,” as “When shall be follows: con- compelled by language unless of provid- agreed,’ or ‘it is contract reads ‘It is plainly expressed. The reason of tract ed,’ stipulated,’ or understood’ or ‘it is ‘it is pre- disinclination a construction is sueh act, simply certain that A do a or dealing justice vents out perfectly act is clear done it not equities parties according to the of promises question, in A to do the act whether ” Contracts, § Williston on case.’ acquire right a he whether will enforcement of conditions “Because the only Argu- by doing that act. party other penalties frequently leads to forfeitures and the words mean both possible ment is always indisposed courts have things. matter construction, of these As conditional, lan- contracts as unless the strue bilateral better to favor contracts than seems mistaken; and guage clear .too better, bilateral unilateral, contracts disregarded expressed con- plainly frequently meaning of the is doubt- where de- unwillingness to ditions, because of their involving promise words as a ful, construe rights on account all prive promisee a expected to do the party who is act by the condition.” Williston breach some trivial question than as words condition. Such Contracts, § on protects parties to both a construction agreement to transaction, also does not involve the We conclude slight perform liability consequences failure to a that a notice is destroys rights under contract. the defendant. wholly “(a) He ben- stipulation has received as no substantial Treating plaintiff’s under condition, is efit promise, a and not a on de recovery to its breach thereof fatal probable “(b) become more It has not applicable to promise? The rules fendant’s a for- the contract was made that than when ordinary con question, in the case duty happen on tuitous event chapter in tracts, subject of an entire are the perform depends, Contracts, Williston’s treatise on Law “(c) There has been a material here e. one need 26. But of those rules prospec- perform promise the return or sueh in Boone noted, first Mansfield stated Lord inability unwillingness tive “The words: Eyre, 1 H. Bl. in these is stated in 2.75to 282. Sections clear, mutual eove> very distinction is where permit- “(3) a contract is rescinded as If go to consideration nants the whole nei- (2), ted the rule stated Subsection considerations, sides, they both mutual are right a on the party ther thereafter has based where precedent other, one to the party’s promise.” other go may paid part, to a a breach where Essentially rule laid down the same damages, defendant there the in. it is Contracts, wherein § Williston plead covenant, remedy on his and shall premium is stated that in sueh contracts the precedent.” a condition paid promise for the and not risk —the Supreme Court of therefore, performance it; performances “The has stated rule as follows: are not equivalent for as one. contracted nonperformance go must on one side another. The elements for rescission be- substance entire ing present, for, relief we and no sueh asked may consideration, to the whole nonperformance by conclude that “the just con safely be the intent inferred discharge to such does not a contract struction act to be if the the contract the other.” performed on the there done, one side is not It strongly persuasively urged stipulations is no consideration on the for the surety company may real suffer a other side.” New Texas & Pac. Orleans v. hardship phrase unless this is otherwise con Ry., 334, 18 S. Ct. strued; that mighty oaks from acorns Httle L. Ed. 178. grow; grow that a small default into stip It cannot eontended that the large one, without surety goes ulation as to notice whole of the company, and opportunity with no to protect company. moving surety consideration danger itself. The a fancied one. On agree principal consideration for the other hardship might be worked on ment surety company payment the insured if surety construed as the the premium. aleatory con So it is that company wishes; single failure of the book tracts —those re remit of one on a event— is conditioned fortuitous quired, might liability defeat theft in governed applicable rules although remittance was later ordinary contracts. the Restatement made, harm came of it. itBut is not Contracts, question the Law of Law American In hardships. relative nonperformance stitute deals with the easily could have conditioned promise counter (Topic sections 261 to on the giving notice; C). is, It Did aleatory then deals with do so? not; contracts We think it did remedy section 287 therefore recoup any as follows: it suf loss plaintiff’s because fered an breach. Its “(1) The rules of 261 to Sections *9 alleged swer three preju times was it (Topic C) applicable are not a bilateral plaintiff’s diced by breach; but it no offered promise substantially contract in which one support evidence in Presumably thereof. it aleatory inor which sub- both are promises prove could not that, prac under its rules and stantially aleatory on but conditional the tices, would liability, have terminated its event; and, same except fortuitous as stated premiums paid, foregone premi returned and (2), Subsection prospective actual or non- come, the ums to company because book was performance by one a contract sueh apparently dilatory. honest recovery but No discharge the other. pay was allowed on account of the failure to “(2) Either party to sueh $3,804.79 contract as the sum of May admittedly due (1) can, stated in by Subsection giving reported no- for sold. knowledge books The tice of intention so, do rescind the con- plaintiff which had com was book tract, if pany tardy in remitting was the cash for $24,- recovery stipulated there were no reported sold, as and books it un- on hand “reported 377.01 of stipulated that books as item; for it is allowed this $3,804.70, sold.” This the sum plaintiff suspicion excludes had no reported as items, had, all other for books recovery the default for less $24,377.01, judgment re- The was for sold. for the failure to books which account only been Furthermore, recovery has dividend. ported hand. amount Since as on unsold, it reported reported reduced had the value of books due had for books been sold cash amount $16,000 $3,800 May of cannot decreased from in 1928 to reported re- for books sold. prejudice due 1929. The trial court found sulted from the failure to judgment The is affirmed. plaintiff knowledge. default of which had over- law, finding this action cannot Judge (dissenting). PHILLIPS, Circuit turned. refer between the I shall contract the trial Com- assigns Surety Company Defendant error that the MacMillan its plaintiff, by court pany declined to as “the bond” and contract be- hold relationship Company Book conduct, changed had its tween MacMillan Company trust to one as “the contract.” one argues that Defendant debtor and creditor. early 29, May As Book Com- separate guaranteed “the all safe par- breached the the sixth pany money” books; custody to make agraph requiring contract company’s not objecting to the book May, reports quarterly remittances. relationship day specified, to remit Company agent the MacMillan protected open credit not one became the Company’s to re- condoned failures the Book how pleaded; This bond. defense is stating, required by mit facts. premise unsupported ever, the Company: letter to the Book “I am in a “in the contract describes * * * under- asking I for remittances moneys and custody cluding * * * the safe along as usual come stand according same, proper remittance of the convenient.” On November inaccurate; description terms;” its Company MacMillan Com- Book wrote the contract; on provision is in no such public had pany stating accountants dis- relationship of contemplates the contrary, it carry- employees covered one of had are creditor as soon debtor and years and ing period of peculations sold. shape,” “left stores in bad had it owed surprised learn that Defendant contends its lia then $10,000 Company than its more MacMillan bility, any, penal in excess of sum is not if showed. On October records re dividends bond, $20,000, less Com- MacMillan Company Book owed the bankruptcy. by the ceived year’s $5,124.76 previous bal- on the pany following books stipulated “that These, many defaults examples are ance. actually reported hand unsold were not as on May 1926, and occurred between whieh for” accounted amounted recovered or Book president July applicable to $24,377.01; that dividends July 30, cir- 1929. The died $6,- controversy, are items involved aroused surrounding his death cumstances $17,890.66, judgment 483.35. The Company and MacMillan suspicions of the in subtrac (excepting $3 for a error whieh letter: following it to write the caused tion) difference between the two. is the “July for the held the defendant loss Wells, Company, the book R. W. because suffered “Southern Manager, Oklahoma. Tulsa, contract. That did not hereby notified nothing in the bond concern “Dear Sir: There You Company, Oklahoma Book paid the ing subrogation; defendant had Oklahoma obligations to us penal to meet its paid sum of the failed City, or had loss, entire entered into on Au- subrogation equitable arising out of a contract bond, of. surety of Oklahoma 18,1924. Mort presented. York & As gust New Title *10 would be look we shall you (C. 8) Company 51 485. advised Bank A. gage v. C. Co. of the to the amount you protection in the A contention is made did neither. to bond, It loss said default. $20,000, against from or as briefs, in the not mentioned answer but judgment truly yours, error, “Very should signments Company MacMillan due cash balance “The $3,804.70,the reduced Henry Phillips). “By reported (Signed by J. 1, 1929, for books sold. May The judgment The does not include sum. “JHP-ab” 551 subjects promisor promise given Breach of only This is breach notice necessarily damages, Company. liability in but does Book side. other excuse The Book Com- last made party fail- prevents the Breach of condition pany Company dated MacMillan de- right, or ing acquiring 27, May 1929, quarter end- and covered lia- him prives subjects him no one, ing An after 31, March audit bility.” 30, July 1929, disclosed breached. $24,377.01 notiee was been sold and as to amount had The liabil- reported Company. a condition to Since Therefore if was the Book be- ity judgment Company, period 1929; following 31, March portion low year, was erroneous. end sehool substantial been such books must have sold “No one majority opinion state: The reported prior report. long the last expressions to condition customarily used Notwithstanding bond.” With breach of the con- is found in employees agree. “provided” tract and word this I cannot a condition Company import its records with an had falsified word to ac- con- Company’s MaeMillan in insurance frequently reference and is so used count, 4) 99 Daley (C. funds of the Book A. Huggins C. embezzled tracts. v. Company amounts, the Mae- 610, substantial 48 L. A. 606, F. R. investigated Company Millan neither Co., 40 In Ins. Trust Co. Union Home v. dition of Company reported the Book nor 1917F, R. A. 367, R. I. A: L. 100 such information to 375, the court said: order that it be warned of the neces- 'provided’ in instruments “The word sity investigation part. on its gener- this character contracts] [insurance The bond nature is in the of a contract meaning, and, con- legal al has a well-settled applicable insurance and the rules ordi natural im- primary sense, strued nary applied contracts should of insurance agreement.” ports and not an Guaranty thereto. Fidelity United States & 24 Deterling, 447, v. 120 N. Y. Graves Centropolis v. Bank F. 8)A.C. 657, N. E. 655, said: 913, (2d) 918, 53 A. L. R. 295. mind, time “For out of conditions rule is well settled usually preceded by 'pro- sueh words as States courts that insurance, contracts of like viso,’ 'subconditione,’ their quod,’ ‘ita contracts, other should construed accord equivalents.” modem ing meaning em sense and of the terms “provided,” The word construed in ployed, ought and that those terms to be tak imports primary sense, natural a condi understood, en, plain, effect in their agreement. tion and not' a covenant ordinary, popular sense, and that it Co., supra; v. Trust Insurance Co. Home where, because ambiguity in the lan Ormsby 72, 58 Phenix Ins. 5 S. D. N. Co., v. guage employed, the fairly contract is sus County, 303; Kaufman 301,W. Vitt v. De ceptible of two constructions —one favorable App. 332, 224; & Tex. 66 S. W. Rich Civ. to the insured and the other to the insurer— that the rule of liberal construction in favor Atwater, 409, 419; Hotchkiss v. 16 Conn. County Trust Co. of St. v. Phoenix Louis applied. the insured v. Chase Co., App. 223, Ins. 210 S. Mo. W. Business Men’s Assur. ofCo. America 102; Streicher Heimburge. (Cal. v. App.) F.(2d) 34; Fidelity A. United States 776; 262 P. Weber, Stockton v. 98 Cal. Guaranty Guenther, & Co. v. 281 U. S. 332, 334; 433, 33 P. Southern Colonization S. Ct. 74 Ed. R. L. 72 A. L. Derfler, 73 Fla. 924, 75 So. L. R. Bergholm v. Peoria Life Ins. 1917F, Huggins Daley, supra. 52 S. Ct. 76 L. de Ed.-, 15,1932. Feb. cided Insurance Trust Co., Co. v. su- majority opinion pra, par- holds the court said: respect agraph of the bond with “The claims that the words in independent covenant and not a condition. mortgage clause, 'Provided that in ease the Williston, Mr. Contracts, in his work on or owner mortgagor negleet to pay any 665,.says: 2, § vol. premium poliey, due under this mortga- distinction “The between promise gee trustee) shall, demand, (or pay covenant on the same,’ import mortgagee condition on a contract other, legal both their premium mortgagor pay effect and wording, their is obvious and' familiar. defendant pay it. claims this clause *11 552 knowledge not of hazard comes of such condition, and be should construed as a ** * mortgagee, neglects no- and he fails or agreement. as an insurer, per- tice of same and has the follow- Dictionary “In Bouvier’s Law change in- ownership mission for or such ing given: definition of hazard policy.” crease indorsed on the “ proviso implies always ‘A a “provided” The word be construed to will change subsequent unless a cove- words express a condition the context or unless from nant.’ a from an examination of the as instrument Atwater, 16 “In &Rich Hotchkiss v. appears whole it that the intended page Conn. Cummings Lohr, otherwise. v. Ill. * * * says: Atwater, 972; 92 E. Rich N. v. Conn. “ Swift, Judge ‘It is certain, by isas 409; Heimburge, supra; Streicher v. Stock that there proper express no is word more v. Weber, Insurance supra; ton v. “provided”; a condition than this word Co., supra; Trust Southern Colonization always appears unless it taken, be so Derfler, supra. v. par- the context intent of the to be the anything or Is there in the context * * * ties that it shall a covenant.’ constitute a bond viewed as whole indicates “Had intention been that word re provision intended the ‘provided,’ clause, as should spect to covenant rather notice should be a legal meaning effect, be its primary a condition ? The than courts hold that a that the clause should be construed as in provisions is not due under such until the condition, any possi- covenant rather a than knowledge obligee fact sured or ble ambiguity easily have removed could apprised, insurer whieh the or by ‘and the addition of few a words dili by or until exercise reasonable agreed’ any phrase.” or similar acquire gence obligee or would insured Ormsby v. Co., County v. Phenix Insurance su thereof. Van Buren 490, 115 N.
pra, Co., Iowa, the court said: American Rep. Eggleston 290; 126 Am. v. W. St. stipulation in “It be noticed Iowa, 316, Co., Ins. N. Bum 21 W. mortgage clause is that the insurance Co., N. Ins. Ins. Norton v. stead v. Y. mortgagee interest shall not Y.) 649; Co., (N. Lawrence Ins. 7 Cow. neglect or by any invalidated act owner (N. Y.) 11 Johns. provided mortgagor, or that in ease the owner any mortgagor neglects pay imposed provision or refuses to construed such or Thus require- de- premium policy, then, impossible onerous due under this condition or mortgagee Company. mand, pay or trustee shall ment the MacMillan When the' mortgagee re- same; provided, also, quarterly Book failed make a any port required or remittance time trustee shall or within the only portion of ownership of hazard change or increase remitted a or report, it knowledge, whieh cometo his her due or the amount shown Mac- change simple matter for the permission shall have of own- for such have been would sixty period ership Company, or within the of hazard indorsed Millan increase * * * default, have mailed policy. days after such a duly notice thereof to verified “‘Provided’ is defined Webster as: Company. * ** stipulation.’ condition; by ‘On plain purpose of Anderson, Dictionary Law, “Mr. Surety Company would to insure that says ‘provided’: express- word ‘No better change in the or apprised warned any_ always taken, un- so es might Company that condition of the shows that the less the context intent that it so guaranty hazard increase Atwater, a covenant.’ Rich create the hazard might investigate and, if deemed appears ease there to be Conn. 409. ought not continue changed that it subsequent language nothing defaults, that it against future insure ‘provided’ indicating that the term right advantage to terminate take Therefore, covenant. intended mortgage in- clause provision preceded mortgagee interest of is such surance Not word neg- any “provided” invalidated act word not be or should —an mortgagor it does not express condition—-but prop- owner of the lect of the “agree” operative “promise” or word insured ceases whenever tain erty while the noted change ownership import. like It will increase there is a *12 responds damage for Company Millan to states, MacMillan no “The preceding paragraph * * * flagrant, repeated, breach- keep, perform and substantial do and Company shall recovers provision part, not contract,” provision notice es as to pro- Surety penal Company MacMillan from full does terms bind the not not even anything, vision of the bond. Company does to do MacMillan indirectly refer directly to the Company guaranty Surety The Company. provision is: any provided broadly indemnity ** * condition) That (on Company breach of the Book “Provided, * * * years. written was to run for five default the contract which event * * * days Having regard scope shall within the broad notice thereof run, Surety guaranty, period be to the to after such default mailed time was ” * * * fact Company. in- the hazard of the risk crease, damages fact that breaches urged degree with some While it provision of the notice be difficult would logic provision with reference prove, and the not parties fact that the did by the Mac- of the contract apt use words covenant promise) cove- Company Millan is in the form did use words a con- import nant since it what the MacMillan Com- states dition, it my “pro- is opinion word do, pany provision signification vided” should be its usual not, clearly contrast thereto does provision and that such should be construed form of a condition. a condition. opinion majority suggests the bond Surety Company discharged provide, frequently in terms to the known obligee, insurance, done a breach contracts of Surety Company bound, of condition forfeit bond. It is complied Building with. Home & Sav- necessary for a contract provide that which ings Ass’n Casualty v. New Amsterdam recognizes settled law effect the a - C. A. F.(2d) 989, 991. In such a breach of condition. ease the prejudice. insurer not show need Finally, to provision construe the with re- Casualty Co., supra; Association spect independent an notice as covenant St. Louis A. Iron Co. v. New Amsterdam would render it valueless to the Com- Casualty 8)A. pany. only remedy for the breach For these opinion reasons I am of independent an covenant action for is an judgment should be in- reversed damages; constitutes defense. In or- judgment structions to enter for the damages, der recover Company the Surety Company. would have to show had it received notice investigated it would have affairs of the and would discovered conditions which would have caused terminate Such facts would FIRST HUNTINGTON NAT. BANK SALT difficult impossible if not prove. LICK DEPOSIT BANK. Mr. Contracts, Williston in work on No. 2, 665, says: § vol. Appeals, Circuit Court Sixth Circuit. matter construction, “As seems bet- May 13, 1932. ter to favor bilateral contracts than unilater- al, better, and in bilateral contracts meaning doubtful, involving promise construe words as expected who is ques- to do the act tion than as condition. words Such a con- protects struction transac- both tion, and also does not involve conse- quences slight that a failure to whol- destroys rights ly under the contract.” doI meaning believe the lan- guage doubtful, to con- furthermore strue the concerning notice as independent protect both covenant contrary the transaction. On the result of so construing it is that Mac-