147 Ky. 285 | Ky. Ct. App. | 1912
Opinion op the Court by
Affirming.
Prior to 1904, appellee, Citizens National Bank of Monticello, Kentucky, organized as a national bank with $25,000 capital stock, which was afterwards increased to $50,000. It had in its employ as cashier, Charles Mc-Connaghy, against whose dishonesty the bank was insured during* the first years of his service, by some company other than appellant. On March 15, 1904, appellant executed a bond insuring the bank against loss to the extent of $15,000, by reason of fraud or deceit on the part of its cashier, McConnaghy, which amounted to embezzlement or larceny. By the express terms of this bond it expired on March 15, 1905, and annually thereafter continuation certificates were issued to the bank, which continued the bond. The number of the bond was 292114. McConnaghy remained the cashier of the bank from the date of the execution of the bond to October 31, 1908, at which time Johnson, a national bank examiner, found a shortage in his accounts with the bank. The cashier’s first criminal acts occurred the last of 1906 or the first of 1907, and continued until the date of discovery. His shortage in the aggregate amounted to about $34,000, but it is not shown for what amount he defaulted in any one year. Appellant contends that the bond executed March 15, 1904, and each continuation certificate executed annually thereafter, to March 15, 1908, constituted separate and independent contracts, and that therefore, the bank must allege and prove the loss occurring under each of them, and that the rights of the parties should be determined as
As stated, the bond in question was issued March 15, 1904, and the bank paid the premium, $45, at that time. Appellant agreed in the bond to indemnify the bank in the sum of $15,000 against any loss it might sustain at the hands of its cashier by any acts of his which amounted to embezzlement or larceny, for the term of twelve months, provided his wrong-doing was discovered within six months from the time the contract expired. If the bond and four renewal certificates contained only these stipulations, then appellant’s contention is correct, and the'case would be governed by the DeJernette case, but we are of the opinion that the facts of this case show that the parties intended that the bond and four continuation certificates should constitute one continuous contract. In the original bond this language is used:
“The company shall, during the term above men
Similar language is used throughout the bond, and we are unable to understand why. If the bond was intended by - the parties to have no connection with any other, why was this language used?- Eor what was it inserted? It appears from this language that appellant was obligating itself in the sum of $15,000 to pay the bank for any embezzlement or larceny committed by its cashier, not only from March 15, 1904, to March 15, 1905, but to any period that might be fixed by any renewal of the contract. There are also four letters in the record which, to our minds, show that the parties intended that the original bond and the 'four renewal certificates were to constitute one contract. These letters were written by the president of appellant on the first day of each February after the execution of the original contract, and were directed to McConnaghy, the cashier, and were for the purpose of reminding him as to when the premium on the indemnity insurance would be due. As all the latters are, in substance, the same, we will copy the last, omitting the formal parts-:
“Baltimore, February 1, 1908.
“We hereby notify you that bond No. 292114, for $15,000 issued by this company on your behalf to Citizens National Bank, Monticello, Ky., will expire on the 15th day of March next. Issued the 15th day of March, 1904.
“The premium, $45, should be paid on or before the date of expiration, and a continuation certificate secured, otherwise the bond will lapse.
“Kindly have thé certificate below filled in and signed by your employer, and forward with remittance for premium to Mr. T. S. Dugan,- Louisville, Ky., when the renewal receipt will be sent you.”
It will be observed in all these letters- that the president refers to the bond or original paper as bond No.
“The premium, $45, should be paid on or before the date of expiration, and a continuation certificate or a new bond secured, otherwise the bond will lapse.”
_ Thus we see the words “new bond” were inserted in this letter and indicate that a new contract was in the mind of the president, but the premium was paid and appellant sent the bank a continuation certificate, and no new bond was issued. The fact that appellant issued to appellee four continuation certificates, each covering a period of one year, beginning on March 15, 1905, is also evidence of the fact that the parties intended that the original writing and the certificates should constitute one contract covering a period of five years. We will copy one of these certificates only, as they are in substance the same except as to date. • It is as follows: (Omitting the date and signature of the official.)
“In consideration' of the sum of forty-five dollars, The United States Fidelity and Guaranty Company hereby continues in force bond No. 292114 in the sum of fifteen thousand dollars, on behalf of Chas. McOon
“Witness the signature of the President and Ass’t Secretary this 1st day of February, 1905.”
Each of the' certificates refer to the fact that they continue bond No. 292114, the number of the bond executed March 15, 1904, clearly showing that one obligation existed for all these years. The bond was kept alive in a manner similar to an insurance policy, that is, by the payment of annual premiums. (First National Bank v. Fidelity, &c., Co., 100 A. St. Rep., 765, and Fidelity Deposit Co. v. Champion Ice Mfg. & Cold Storage Co., 133 Ky., 74.)
Appellant makes no complaint of any wrongful act upon the part of appellee in obtaining the insurance under this bond. It does not contend that any misstatements or concealments -were made in the application for the bond and upon which the bond was issued, except in one instance, and that was in answer to the following question:
“To whom and how frequently will he account for his handlings of. funds and securities 1
The answer 'to this ■ question was:
“Twice a year by U. S. Bank Examiner and board of directors four times year.”
It is not claimed that the United States Bank Examiner did not examine the cashier’s accounts as stated in the answer, nor is it claimed that the bank officials did not make examinations as many as four times a year or of tener, but it does claim that the examinations were •not thorough and that it was deceived thereby and for that reason should be released from all liability, as it had a right to expect from such answer that such examinations would be thorough. At the time appellant issued this insurance, it knew that the bank was what is called “a county bank” and that the officers of it were men who, probably, could not give the accounts an' expert examination, and it is presumed that it understood the answer to the question to mean that they would give the accounts the best examination they could. In addition, such statement was a mere promissory representation or an announcement of an unexecuted intention,
Appellant also contends that it is released from liability on the bond on account of misrepresentations made by the president of the bank in his application for the continuation certificates. All these applications are, in substance, the same, therefore, we will copy but one of them. It is as follows:
‘ ‘ To the United States Fidelity ¡and Guaranty Company.
“This is to certify that the books and accounts of Charles McConnaghy were examined by us from time to time in the regular course of business, and we found them correct in every respect. All monies or property in his control or custody, being accounted for, with proper security and funds on hands to balance his ¡account, and he is not now in default.' He has perf®rmed his duty in a capable and satisfactory manner, and no change has occurred in the terms or conditions of his employment as specified by us, when the bond was executed.”
As .previously stated, this bank was examined several times each year by a United States Bank Examiner, and the president and directors made several examinations. The president and directors were not expert accountants, however,' and they testified that no discrepancies were found. This question was submitted to the jury under proper instructions and it was settled in favor of appellee.
The instructions were in accord with those given in the case of Fidelity & Guaranty Co. v. Western Bank, 29 Ky. L. R., 639.
There is no pretense that the bank officials had any knowledge of or suspicioned that McConnaghy had committed embezzlement or done any wrong before the applications were made for the bond or the continuance certificates, but the claim is that if appellee had exercised ordinary care it could have ascertained the same before the statements were made.' This question was also submitted to the jury upon proper instructions.
The cashier, McConnaghy, about the last of 1906 to the date of his- detection, was in the habit of overdrawing his account in the bank, and appellant claims that
It appears from the record that McConnaghy stole $1,000 in cash from the bank after the bank officials knew he was ¡a defaulter, but the instructions given by the court did not allow the jury to consider that item. The instructions only allowed a recovery for embezzlement or larceny of the bank’s money between March 15, 1904, and October 31, 1908, inclusive, the period covered by the contract, and confined the jury to the amount named in the bond, $15,000. The bank’s loss between these dates was much more than that sum.
It appears that appellant had a reasonably fair trial, and the judgment is affirmed.