34 F. 291 | U.S. Circuit Court for the District of Connecticut | 1888
This is an action at law, in which, by written stipulation signed by the parties, a trial by jury was waived, and the cause was tried by the 'court. Upon such trial, the following facts were found to have been proved and to be true: james N. Patrick was, on April 2, 1883, appointed by the plaintiff, a duly incorporated life insurance company, located in and having its principal office in Hartford, Conn., its general agent to procure applications for insurance for it in the-state of Missouri, excepting one county; to receive premiums upon all policies issued upon such applications; to collect premiums upon renewals of the same, and to collect renewal premiums on existing policies issued by said company in said territory. He agreed to account to said company on or before the 10th day of each month, or at any other time when required, for all premiums received by him or his agents, and remit the amount of the same, less the charges to which he was entitled by the agreement, and to give a bond to the company for $3,000, with good and satisfactory surety, for the faithful performance of his duties, and to renew' and increase the same as might be desired. It was further agreed that.the contract could be terminated after one year from its date, by either party, upon not less than 60 days’ notice to the other of such proposed termination. By the rules of the plaintiff which existed at the
On February 26, 1883, said Patrick gave to the plaintiff a bond, with throe persons as sureties in the sum of $3,000, for the payment to ¡he company of ail moneys which ho should receive belonging to it for one year from April 1, 1883: and on April 1, 1884, gave another bond in said sum of $3,000, with three persons as sureties, for the faithful performance of his duties,- so long as he should continue to be its general agent. Prior to June 15, 1884, said Patrick, at his own suggestion, made application to the defendant, an incorporation, duly incorporated for the purpose of executing contracts of indemnity for the conduct of employes, and located and having its principal office in the city of New York, for a bond to the plaintiff in the sum of $3,5.00. This application was made by Patrick, without the solicitation of the plaintiff, probably because he feared that'his bondsmen would become liable, and he preferred that the loss should fall upon a corporation rather than upon his personal friends. The'defendant sent the application to the plaintiff, with a printed form of employe’s certificate to be filled by. an officer of
■ “I have read the foregoing declarations and answers made by J. 2sT. Patrick, and believe them to be true. He has been in the employ of this company during one year, and, to the best of my knowledge, has always performed his duties in a faithful and satisfactory manner. His accounts rendered to this company were last examined on the 13th day of June, 1884, and found to be correct in every respect. He is not, to my knowledge, at present in arrears or default. 1 know oi nothing in his habits or antecedents affecting his title to general confidence, nor why the bond he applies for should not be granted to him.
“Amount required $3,500. Bond to date from June 15, or June 16, 1884.
“ Dated at Hartford. thé 16£7t of June, 1884.
“J. L. English, Secretary, on behalf of JEtna Life Insurance Company.”
The bond in suit was thereupon issued, the important portions of which are as follows;
“This bond was made the 15th day of June, 1884, between the American Surety Company, hereinafter called ‘ the company ’ of the first part, and J. H. Patrick of St. Louis, Missouri, hereinafter called the ‘ employe ’ of the'see-ond part, and .¿Etna Life Insurance Company, hereinafter called the ‘employer ’ of the third part. Whereas, the employe has been appointed in the service of the employer, and has been assigned to the office or position.of general agent by the said employer, and has applied to the American Surety Company for the grant by them of this bond: How, therefore, in consideration of •the sum of thirty-five dollars,, lawful money of the United States of America, in hand paid to the said company as a premium for the term of twelve months ending on the 15th day of June, 1885, at twelve o’clock noon, it is hereby declared and agreed that, subject to the provisions herein contained, the company shall within three monts next after notice accompanied by satisfactory proof of a loss, as hereinafter mentioned, has been given to the company, make good and reimburse to the employer all and any pecuniary loss sustained by the employer of money, securities, or other personal property in the possession of the employe, or for the possession of which he is responsible, by any act of fraud or dishonesty on the part of said employe, in connection with the duties hereinbefore referred to, or the duties to which, in the employer’s service, he may be subsequently appointed, and occurring during the continuance of this bond, and discovered during said continuance or within six months thereafter, or within six months from the d'eath, or dismissal, or retirement of the employe from the service of said employer. * * * That if the employer shall at any time hold, concurrently with this bond, any other bond or guaranty of security from or on behalf of the employe, the employer shall be entitled, in the event of loss by default of the employe, to claim hereunder only such proportion of the loss as the amount covered by this bond bears to such other security; that the company shall be notified in writing, addressed to the president of the company, at its office in the city of Hew York, of any act of omission or of commission on the part of the employe which may involve a loss for which the company is responsible hereunder, as soon as practicable after the oecurrance of such act shall have come to the knowledge of the employer. ”
The premium wras paid by Patrick, June 11, 1884.' The bond was sent to him immediately after its date, and ivas delivered by him, when in Hartford, to the plaintiff, July 29, 1884, which accepted the same;
The money collected after June 15, 1884, and not remitted or accounted for, was, on January 1, 1885, $2,828.30.
The defenses are as follows: (1 and 2) A concealment by the plaintiff, at the time of the execution and acceptance of the bond, of previous known defalcations of said Patrick, and misrepresentations by the plaintiff relative to the conduct of said Patrick, which were known to be untrue. These alleged concealments and misrepresentations at the time of the execution of said bond arc all contained in said certificate. (8) A concealment in August, September, October, and November, 1884, of Patrick’s known acts of omission and commission by which the defendant might be liable to sustain loss. (4) That the second bond of Patrick was concurrent with the bond in suit.
Patrick’s first report of premium collections was sent to the plaintiff on May 15,1883. It accounted for all the collections made in the month preceding, and was accompanied by a bank check for $501.31, the balance due the company; but on May 15th he had collected of the May renewals nearly $400, which had been deposited to Ms credit in the bank, and, after drawing the check for $501.81, there remained in the bank to his credit $50.52, showing that he had in fact used of the plaintiff’s money from $250 to $300. This deficit gradually increased during the year 1888, but was partially made up by the discount of a note for $1,200 in December, 1888, after which the same continually increasing use of the plaintiff’s money went on, and resulted in the defalcation which has been stated. The habit and practice of Patrick was to postpone sending
The question of fact which arises upon the first and second defenses is, did Mr. English know, or had he adequate reason to know, that any one of his statements was untrue? it will be observed that all the statements in the certificate, except one, were declarations of the belief or knowledge of Mr. English; and it will be further observed that Patrick was, on June 15th, and for a long time had been, a defaulter. I see no reason for the opinion that Mr. English, on June 15th, thought that Patrick collected money which ho had not accounted for, or that he was not performing his duties in a faithful and satisfactory manner, or that he was in arrears or default as a collecting agent. The only knowledge that he had of Patrick’s indebtedness to the company which has presented itself to me as of importance was the non-payment of a draft for $150, which he drew upon the plaintiff in March, 1884, and which it paid; but required an explanation of the reason for making it, and demanded repayment, which had not been made when his May account was rendered, — or on June 15th. Ho drew the draft because he had a guaranty of $1,800 for the year, and his commissions were apparently not about to yield that sum, and he was poor and needed the money. Mr. English supposed that the form in regard to “arrears or default” referred to the collection accounts of the agent. This was, in fact, its lair meaning, and it was not intended to relate to items of borrowed money, although if these unpaid items had amounted to a sum which was significant, and could reasonably bo supposed to indicate that the safety of his collections was in danger, the fact should have been communicated iir tlie certificate.
The remaining branch of the question is, did English have adequate reason to know of Patrick’s defalcation and unfaithfulness? For, although he did not know the facts in regard to the agent’s conduct, yet, if his ignorance arose from gross negligence in not ascertaining facts which were within Ms means or knowledge, or if he recklessly made untrue representations, he is chargeable with misrepresentation. Upon this branch of the question, the defendant occupies stronger ground than it does in regard to the knowledge of English. Patrick, on May 27, 1884, advised English that two annual premiums of Dieckhaus and wife had been paid in advance. These premiums wore not accounted for in the monthly reports. On June 15th, Patrick liad renewal receipts in his hands which were lour or five months past due, of which $621,15 were due in January, and $886.21 wore due in March. On May 27, 1884, by letter to English, Patrick asked for the renewal receipts of one Taylor, from which English justly inferred that the December, 1888, renewal had been paid, and wrote him June 9th that ho hoped it would
The next question of fact relates to the non-disclosure to the defendant of Patrick’s remissness in August, September, October, and November, 1884. The obligation of the defendant was to pay to the plaintiff any pecuniary loss which it had sustained during the specified time by any act of fraud or dishonesty on the part of Patrick, in connection with his duties as agent. The plaintiff was obliged to promptly notify the defendant of any act of omission or of commission on the part of Patrick which “may involve a loss for which the company is responsible hereunder.” It cannot be supposed that this provision calls upon the employer to notify the defendant of every act of laches or delay or inefficiency on the part of the agent, which ultimately may create a loss to the employer. It means that the defendant shall be notified of acts which may create a loss for which it is responsible, — that is, a loss arising from fraud or dis
The fourth defense is that the bonds given on and after April 1,1884, were concurrent. The bond from the defendant was procured by Patrick in order to substitute it for the existing bond as to new transactions. It was accepted by the plaintiff, with the understanding that the old bond was not to exist against losses from unfaithfulness which occurred after June 15th. The two bonds were not concurrent.
The remaining questions are those of law. It is insisted by the defendant that there is no liability for any defalcation prior to July 29th, the dale of the delivery of the bond to the plaintiff. It is true that “the delivery of a deed is presumed to have been made on the day of its date. But this presumption may be removed by evidence that it was delivered on some subsequent day; and, when a delivery oil some subsequent day is shown, the deed speaks on that subsequent day, and not on the day of its date.” U. S. v. Le Baron, 19 How. 73. In this case the delivery of the bond to Patrick, which was soon after its date, was not a delivery to the plaintiff'. The latter had a right to accept or reject it, when
' The only remaining question is as to the amount of the defendant’s liability. He received, after June 15th, $2,823.30, which he either used himself, or wrongfully accounted for. That sum of money which he received after the date of the bond, instead of being honestly applied, was by fraud and dishonesty', applied in payment of previous defalcations, and the new collections were, by like fraud, not accounted for. The amount due upon the defendant’s obligation was on January 1, 1885, $2,823.30, for which, with interest to the date of the payment, let judgment be entered in favor of the plaintiff.