*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. 210 S. W. 98. Phoenix Ins. a con- held it is the same as v. made the condition to Other courts have junction, ance with which is Doneghy (Mo. Sup.) Robinson S. 210 thereon.” imports condition, 4 general Community 655; a it sometimes one of law. and that W. limitation, covenant, Maryland Casualty 9) Bldg. F.(2d) a Co. 8 sometimes Co. sometimes v. (Tex. Odegard Galveston, 678; Casualty Com. & & v. H. S. A. R. General Stevens usually App.) nec- S. but not 44 Northern Assur. Co. 212 W. C. A. essarily imports Ass’n, Hancock, Bldg. Davis v. v. Grand View 183 U. S. Ct. S. 133,46 104 N. W. 299. L. Ed. 213. Minn. right trary, par pro- gives way cancellation; to the intent fourth gathered upon, an the viso is a limitation ties examination of and not a from of, liability. frequently been instrument, particular whole this indiscriminately “provided” expressing word applied thus explained and has been simply every paragraph in trust.” used or limitation introduction to a covenant Stanley 119, 166, ex- Colt, S.) paragraph (73 5 Wall. contract after the one U. obliga- pressing L. the above 18 Ed. 502. “the condition of tion.” the undertaking “Where one side is on stipulation terms condition to The contract, performance of other, provides is, where the contract —that guaranteed, expressly hap performance act, of some or the turn to to We find what obligations of pening event, and the some performance guaranteed. find We per depend the contract are made company agreed place book school books happening, formance or conditions —the every place they might the state precedent. The sense conditions reason and prac needed, which means course contemplated transaction, must as it tically every the state of Oklahoma. hamlet in and is been understood year report Four times a contract, de to be collected from whole every the number of books sold not; termine or it whether dealer state, in the and the left number in his determined nature of acts hands, days. do within If must done, in which order single dealer promptly failed to each other necessarily precede and follow books sold and progress performance. But literally could not agreement. comply necessary is not act act one guaranteed While pay the book convenient, useful, though other, it would ment books, it was doubtless beneficial, of it yet as the want contemplation parties that it would, in performance, loss and prevent and the a-general rule, undertake from its to collect damages, compensated convenience can be 30-day period. dealers within that Some not a condition performance of the state, getting were sold to precedent other.” through offices vouchers state is often a slow S. Ry., & New Orleans v. Texas Pac. distribution, widespread task. such a me 875, 883, 43 L. Ed. Ct. might, chanical errors and the like counts *7 Daley F. Huggins 4) In did, require frequent reconciliations. question 48 L. BR.A. the was background This is the which this proviso Hodges con “whether the lease the True, bond was made. the company book held precedent.” It was stituted a condition to days; and remit within 30 court did, but the so determined after trae, plaintiff agreed the to notify defendant a consideration of the entire lease the if the defaulted. But can it circumstances under which it made; was parties the said that the intended to construction, technical rules of that court bond should stand forfeited if there was precise “There no said: are technical words that, failure to of default from the distinguish precedent correspondence which conditions stipulation, gave the subsequent. Whether are one the suspicion anything no was construction, other a matter of to wrong? be solved by ascertaining the party intention They the cre of Considering nature the of of the details ating the estate. not are determined performance guaranteed, the to failure the merely by the instrument, structure of the apt express an use words intent ob arrangement the of the covenants.” ligation upon should cease the Giving full force to notice, promise the rule that the the use words of word rather “Provided” is more happening than the event, a condi- dowe covenant, tion than a we do not feel not the believe that intended that lia use of word the stops inquiry bility upon the the es- bond should end into the with the fail question, sential notify, prejudice the intent of the as ure no resulted by their contract; disclosed even failure. reasoning under the from such We think the strongest of the rule, Supreme statement not Court of the courts are & Guaranty Fidelity from examining foreclosed the entire United States v.Co. S., particular tract. case, pro- the Use of Pressed Brick third 191 U. viso cannot construed Ed. as a condition 24 Ct. 48 L. S. has some reserves to liability, application the defendant a case at bar. There the 5á8 recognizes gov the rule propriety the statute The law of this given was federal bond under Contracts, United of construction.” buildings § for tbe Williston on erning constructed only upon 665. States, and was “conditioned erect performance work faithful any event, say we cannot building according and to to his ambiguity, plainly contract is free from changes thereto, but or additions imposes condition. four fact persons payment ‘promptly make judges have minutely who this con examined prose supplying him labor or material in the disagreement meaning, tract are as to its contemplated said con cution of the work indication ob meaning some ” for the tract.’ latter exists, ambiguity scure. If two are there or mate labor furnished benefit those who applicable. rules construction material- contractor; rials to the one of ambiguities The first is that are resolved defense brought Tbe men suit on the bond. against’ the Business insurer. Graham v. to a had consented was that Men’s Assur. Co. A.C. obligation accepting notes change eases cited. there The second furnished, consent materials without by. well stated Mr. Williston: agree surety; doing, the determining “In at promptly pay principal ment of present time little stress would be laid modified, surety and the exonerated. refinements; rather the court would endeavor uncertainty of the situ court considered the interpret meaning of the words surety ation which confronted according general interpre- principles bond, that, no held when executed the special tation. A rule of construction prejudice shown, obligation being early established which still eases discharged ex because weight ambiguity. some If ease granted by plaintiff. time tension of performance urged be a con- S., 24 said, page at S. Ct. 191 U. subject-matter dition prom- was also juris is a 144: rule of strietissimi “The ise whom performance stringent one, to work'a ought is liable times due, though even were so that words injustice. practical It is one which treated as there is words of condition within éxtended to contracts aet, remedy performance to secure rule, particularly reason the construction be favored that no con- corporation which has aby

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-