Complainant did not put the president of the bank on the stand.

In these circumstances was it the duty of the bank to notify the company of what it had heard?

In American Surety Co. v. Pauly, 170 U. S. 133, 144, 42 L. ed. 977, 982, 18 Sup. Ct. Rep. 552, 556, which was an action against the maker of a bond given to insure a bank against loss arising from acts of fraud or dishonesty on the part of its cashier, the applicable rule was thus laid down:

that the company should be notified in writing "of any act on the part of the employee which may involve a loss for which the company is responsible hereunder, as soon as practicable after the occurrence of such act may have come to the knowledge of the employer," it was ruled that it had been properly held "that the surety company did not intend to require written notice of any act upon the part of the cashier that might involve loss, unless the bank had knowledge, not simply suspicion, of the existence of such facts as would justify a careful and prudent man in charging another with fraud or dishonesty."

But the bond before us not only contained that clause, but the clause under consideration, which was a different and additional clause intended to secure the safety of pre

"If, looking at all its provisions, the bond is fairly and reasonably susceptible of two constructions, one favorable to the bank and the other favorable to the surety company, the former, if consistent with the objects for which the bond was given, must be adopted; and this for the reason that the instrument which the court is invited to in-vention through timely warning. terpret was drawn by the attorneys, officers, It seems to us that the obvious meaning or agents of the surety company. This is of "becoming aware," as used in this bond, a well-established rule in the law of insur- is "to be informed of," or "to be apprised As said by Lord St. Leon-of," or "to be put on one's guard in respect

ance.

ards in Anderson v. Fitzgerald, 4 H. L. Cas. to," and that no other meaning is equally 484, 507 'it [a life policy] is, of course, pre admissible under the terms of the instru pared by the company, and if, therefore, there ment. These are the definitions of the lexishould be any ambiguity in it, must be cographers, distinctly deducible from the taken, according to law, most strongly derivation of the word "aware," and that against the person who prepared it.' There is the sense in which they are here employed. is no sound reason why this rule should not It is used in the same sense in the cashier's be applied in the present case. The object certificate on the renewals of the teller's of the bond in suit was to indemnify or in-bond. sure the bank against loss arising from any To be aware is not the same as to have act of fraud or dishonesty on the part of knowledge. The bond itself distinguishes O'Brien in connection with his duties as between the two phrases, and uses them as cashier, or with the duties to which in the not synonymous with each other. And, in employer's service he might be subsequent- view of the plain object of the clause, we ly appointed. That object should not be de- cannot regard the words as equivalent to feated by any narrow interpretation of its "becoming satisfied," though perhaps they provisions, nor by adopting a construction may be to "having reason to believe." Even favorable to the company, if there be an- then these facts would have demanded inother construction equally admissible un-vestigation or notification, for we think the der the terms of the instrument executed for the protection of the bank."

bank cannot be heard to say it did not have reason to believe that Schardt was speculatBut this rule cannot be availed of to re-ing when it took his professions of repentfine away terms of a contract expressed with sufficient clearness to convey the plain meaning of the parties, and embodying requirements compliance with which is made the condition to liability thereon.

ance as sufficient assurance that he had ceased speculating, and turned its back on any independent inquiry or investigation Our understanding of the provision is that what the company stipulated for was prompt Whatever the common-law duty on the notification of information by the bank in part of the employer to notify the guarantor regard to speculation or gambling on the of the fraud or dishonesty of the employee part of the employee. It was entitled to exwhose fidelity is guaranteed, the parties to ercise its own judgment on that informathis contract undertook to declare the duty tion, and had not agreed to rely on the of the bank to the company in certain speci- bank's belief in that regard. It had the fied particulars. It required that the em-right to investigate for itself, whether the ployee should not have been guilty of pre-bank did so or not. Notification of the exvious default or dereliction within the istence of reason for inquiry was exactly knowledge of the employer. It provided for notification of any act of the employee which might involve a loss without unreasonable delay after the occurrence of the act came to the knowledge of the employer. And it required immediate notification on the employer becoming aware of the employee being engaged in speculation or gambling. The words "becoming aware" were manifestly used as expressive of a different meaning from having "knowledge."

In Pauly's Case, where the bond required

what the clause was intended to secure. The bank neither investigated nor gave the company notice of the information it had, and substituted its own judgment as to the value of that information for that of the company. In our view this conduct on its part amounted to a breach of the stipulation.

The Circuit Judge in his opinion said: "The language of the bond is that the em ployer shall report 'on his becoming aware of the employee being engaged in specula

$422

tion.' Without now stopping to consider at length the meaning of the terms here used, I am of opinion that, in the absence of fraud or bad faith, the failure to disclose the result of the inquiry made in this in-ent with sound public policy. We think it stance did not invalidate the bond as to the surety. Certainly speculation in a reasonable and substantial sense is meant, such in length of time or magnitude as would make it serious. This, when brought to the attention of the bank officials, was a past event, and apparently in itself unimportant. The bank was under no duty by the contract or independently of it to actively institute or prosecute inquiries about Schardt, or to run down loose rumors or anonymous letters." 68 Fed. 459, 465.

⚫424

affirmed a judgment of the Circuit Court for the District of Nebraska in favor of plaintiff in an action on a policy of fire insurance. Reversed.

See same case below, 41 C. C. A. 207, 101 Fed. 77.

indemnity. The representations made in the declaration on which the cashier's bond was issued were clearly misrepresentations. The teller's bond required notification if the bank were informed of speculation on Schardt's part. The president had heard of such speculation, and knew that speculating was something unfavorable as to Statement by Mr. Justice Shiras: Schardt's habits; and the president of In September, 1898, the Grand View course knew that the matters concerning Building Association, a corporation organhim, of which he had heard, were such as it ized under the laws of Nebraska, in the diswas advisable for the company to make in-trict court of Lancaster county of that state, quiry about. True, the second question brought an action against the Northern Aswas if he had heard of matters about which surance Company of London, incorporated he deemed it advisable for the company to under the laws of the Kingdom of Great inquire, and the word "deem" might be Britain and Ireland, seeking to recover the said to give a considerable discretion, but it sum of $2,500 as due under the terms of a was not a discretion to be abused. That policy of insurance that had been issued by the company would consider it advisable to the assurance company to the plaintiff commake inquiry is too plain for argument. pany on December 31, 1896, on certain propThe whole tenor of the bond renders any erty situated in said Lancaster county, and other conclusion impossible. which, on June 1, 1898, had been destroyed by fire.

We cannot regard the representations of the president as consistent with good faith, and he was not even called as a witness by the bank to explain his conduct, if he could have done so.

The decrees of both courts are reversed, and the cause remanded to the Circuit Court for further proceedings consistent with this opinion.

(183 U. S. 308)

NORTHERN ASSURANCE COMPANY
OF LONDON, Petitioner,

บ.

GRAND VIEW BUILDING ASSOCIA

TION.

Thereupon the defendant company filed in the said county court a petition and bond, in due form, and prayed for an order removing the cause to the circuit court of the United States for the district of Nebraska; and on September 29, 1898, the county court approved the bond, and entered an order granting the prayer of the petition for removal.

Subsequently the case was put at issue on the petition, answer, and reply in the circuit court of the United States, and was so proceeded in that, on October 20, 1898, a special verdict was found by the jury empaneled in the case, and on January 14, 1899, a final judgment was entered for the Insurance-waiver of condition against con- plaintiff and against the defendant company current insurance-knowedge of agent. in the sum of $2,500, with interest and costs. The cause was then taken to the United An Insurance company cannot be deemed to have States circuit court of appeals for the eighth walved a condition in a policy of fire insur- circuit, and that court, on March 26, 1900, ance rendering it vold in case other insur-affirmed the judgment of the circuit court. ance had been or should be made upon the property unless by agreement indorsed thereon or attached thereto, because its agent had notice or knowledge of the existence of other Insurance in another company at the time he

delivered the policy and received the premium, where such policy also provided that "no officer, agent, or other representative of this company shall have power to waive any provision or condition of this policy, except such as by the terms of the policy may be the subject of agreement indorsed hereon or added hereto; and as to such provisions or conditions no officer, agent, or representative shall have power or be deemed or held to have waived such provisions or conditions, unless such waiver, if any, shall be written upon or attached hereto: nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached."

[No. 60.]

41 C. C. A. 207, 101 Fed. 77. Thereafter, on petition of the defendant company, a writ of certiorari was allowed, in response to which the record and proceedings in the cause were brought to this court.

Messrs. Ralph W. Breckenridge and Charles J. Greene for petitioner.

Messrs. Halleck F. Rose and Joseph R. Webster for respondent.

Mr. Justice Shiras delivered the opinion of the court:

this case and the grounds of our judgment In order that the questions discussed in therein may sufficiently appear, it seems proper to set out, with substantial fulness, the pleadings of the parties and the special verdict of the jury.

The plaintiff's petition, having alleged the making of the policy of insurance and the Argued October 28, 1901. Decided January destruction of the property insured, then 6, 1902.

proceeded to allege in its fourth paragraph, apparently by way of meeting an expected WRIT of Certiorari to the United defense, that "plaintiff, shortly prior to isO`States Circuit Court of Appeals for the sunce of aforesaid policy by the defendant,

Eighth Circuit to review a decision which

had procured a policy of insurance from the

608.

And

and condition: "This policy is made and accepted subject to the foregoing stipulations and conditions, together with such other provisions, agreements, or conditions as may be indorsed hereon or added hereto, and no officer, agent, or other representative of this company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement indorsed herein or added thereto, and as to such provisions and conditions no officer, agent, or representative shall have such power or be deemed or held to have waived such provisions or conditions unless such waiver, if any, shall be written upon or attached hereto, nor shall any priv ilege or permission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached.' The defendant says that notwithstanding the stipulations, provisions, and agreements above set forth and without the consent of the defendant indorsed upon said policy in writing, and without the knowledge of the defendant, the plaintiff obtained a policy of insurance, upon the property covered by the policy issued by this defendant, in the sum of $1,500 in the Firemen's Fund Insurance Company.

Firemen's Fund Insurance Company, incor- tain amount of premium paid therefor. porated under the laws of California, insur- said policy, besides the provisions *above* ing it against loss by fire of the same prop-quoted, contains the following stipulation erty in the sum of $1,500 for a term of two years, which insurance was then subsisting and remained in force to and including the date of said fire; that the fact of said subsisting insurance in said company was, by H. J. Walsh, plaintiff's president, discolsed to defendant at and prior to the execution and delivery of said policy, and prior to payment by plaintiff of said premium therefor, and was so by him orally disclosed and communicated to defendant's recording agent at Lincoln, Nebraska, A. D. Borgelt, who then had full authority from defendant to countersign and issue its policies and accept fire insurance risks in its behalf and accept and receive the premium therefor, and who in fact accepted said risk and issued said policy, and accepted and received said premium as such agent in behalf of defendant with knowledge beforehand of said concurrent insurance, and with the intent knowingly to waive the condition of said policy that 'it shall be void if the insured now has or shall hereafter make or procure any other contract of insurance' on the property covered thereby. And by the aforesaid several acts and by procuring, receiving, accepting, and retaining of said insurance premium with knowledge of said subsisting concurrent insurance the defendant has waived the said condition and "Defendant says that the property upon is estopped to claim benefit thereof, and is which it issued its policy in the sum of bound by its said policy notwithstanding $2,500 was represented by the plaintiff to the said condition; that plaintiff had no insur-defendant to be of the value of $3,500. The ance on said property except as before stated."

Having stated that plaintiff had rendered and delivered a statement of loss, in compliance with the terms of the policy, the petition further alleged that "on the 26th day of July, 1898, the plaintiff demanded of defendant the payment of said insurance; and defendant, disregarding its undertaking in that behalf, denies liability on the sole ground that said policy has been void from the date of its issue by reason of the said provision in regard to other insurance, the same provision which as aforesaid it had waived at the time of issuing its said policy." The answer of defendant admitted the making of the policy, the destruction of the insured property by fire, and proof of loss, but denied specifically the allegations of the fourth paragraph of said petition, as follows:

"Further answering, this defendant alleges that the policy of insurance which it issued to the plaintiff on December 31, 1896, contained the following provision:

defendant alleges that by reason of the additional insurance upon said property, not consented to in writing indorsed upon the policy of defendant, and not in fact known to the defendant, the policy written by the defendant upon the plaintiff's property was, at the date of the fire which damaged or destroyed the plaintiff's property wholly void, and was and has been void from the date of such additional assurance. Defendant further says that on the 5th day of August, 1898, the defendant tendered to the plaintiff in current fund the sum of $33.75, the amount of the premium paid by the plaintiff upon the policy in question, and now brings into court and tenders to the plaintiff the said sum of $33.75, with interest at the rate of 7 per cent from December 31. 1896."

The plaintiff company replied to the answer, denying that it procured a policy of insurance in the Firemen's Fund Insurance Company upon the property insured by de fendant in violation of the terms of the policy issued by defendant and without the knowledge of defendant, and made the fol

"This entire policy, unless otherwise provided by agreement indorsed hereon or add-lowing allegations: ed hereto, shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy.' The defendant further says that its policy in question was issued to the plaintiff with the express statement therein made that it was issued in consideration of the 'stipulations' therein named and a cer

"The policy referred to in said answer of $1,500 in the Firemen's Fund Insurance Company was, on the contrary, subsisting at and prior to the issuance by defendant to the plaintiff of the policy sued on herein, and was in fact issued December 12, 1895, for th term of three years, and the existence of such policy was personally well known to A. D. Borgelt, defendant's recording agent, who

⚫314

of the said provision in regard to other insurance above referred to.

Our agents at Lincoln have been instructed to return to you the full premium paid them by you, namely, $33.75 at once.

The plaintiff further offered the original policy in evidence, containing, among other things, the following provisions:

wrote said policy, and accepted said risk, | printed conditions of our policy, to which and who then had full charge of defendant's we beg to refer you. We therefore regret to agency at Lincoln, Nebraska, with authority have to advise you, and do hereby say to you, to accept fire insurance risks for and on that the Northern Assurance Company spedefendant's behalf, to countersign and issue cifically and absolutely denies any and all its policies of insurance, and to collect and liability under said policy No. 310,024 held receive the premiums therefor. And at and by you, holding that said policy has been prior to his acceptance of said risk and in-void from the date of its issuance by reason surance of the policy sued on, the plaintiff's president, H. J. Walsh, reported orally to said A. D. Borgelt the fact of such subsisting insurance of $1,500, and said Borgelt, as such agent, with full knowledge of said fact, accepted the risk, and wrote, executed, and delivered said policy to defendant, with the intent on the part of both plaintiff and defendant that the same should be concurrent with the said subsisting insurance and not avoided or affected thereby, and with purpose and intent of defendant knowingly to waive and forego all benefit of the provisions of said policy set forth in defendant's answer; and in faith thereof and with the sole purpose to procure such insurance to be concurrent with the subsisting insurance, and not otherwise, the plaintiff paid, and the defendant procured and received, the premium therefor. By all the aforesaid several acts the defendant has waived all benefit of the particular conditions of its policy prohibiting concurrent insurance, prior and subsequent, except by indorsement on the policy; and the defendant is estopped and concluded thereby from claiming any benefit or advantage by reason of said conditions of the policy."

In support of its side of the issues thus presented, the plaintiff company called as witnesses H. J. Walsh, its president, and Bert Richards, the agent of the Firemen's Fund Insurance Company, who testified that Borgelt was informed by them and had knowledge of the subsisting insurance at and before the delivery of the policy in suit. The plaintiff likewise put in evidence the original policy sued on, and a letter from G. H. Lermit, manager of the defendant company at Chicago, Illinois, and who had signed the policy in suit as such agent, in the terms following:

Chicago, Aug. 2, 1898. To Grand View Building Association, H. J. Walsh, President, Lincoln, Nebraska. Dear Sirs:

We have your favor of the 26th ult., inclosing to us what purports to be proof of loss, making claim under our policy No. 310,024, of Lincoln, Nebraska, agency, and issued to you for $2,500 on household furniture, etc., while contained in the threestory brick and stone building on lot F in Grand View Residence Park addition, on account of a fire which occurred on the 1st day of June, 1898, and beg to say in reply that your sworn statement therein advises us that you had other insurance on this same property to the amount of $1,500. This additional insurance held by you was without the knowledge or consent of this company, and was not permitted by agreement as provided for in lines Nos. 11, 12, and 13 of the

"This entire policy, unless otherwise provided by agreement indorsed hereon or added hereto, shall be void if the insured now has or shall hereafter make or procure any other contract of insurance, whether valid or not, on property covered in whole or in part by this policy."

"This policy is made and accepted subject to the foregoing stipulations and conditions, together with such other provisions, agreements, and conditions as may be indorsed hereon or added hereto, and no officer, agent, or other representative of this company shall have power to waive any provision or condition of this policy except such as by the terms of this policy may be the subject of agreement indorsed hereon or added hereto, and as to such provisions and conditions no officer, agent, or representative shall have such power or be deemed or held to have waived such provisions or conditions unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or remission affecting the insurance under this policy exist or be claimed by the insured unless so written or attached.

The defendant, to maintain the issues on its part, called as a witness A. D. Borgelt, who testified that he was a member of the firm of Borgelt & Beasley, insurance agents at Lincoln, Nebraska, which firm wrote the policy in the Northern Assurance Company on the Grand View Building Association; that at the time he wrote the policy he had no notice or knowledge that there was other insurance upon the property covered by the policy in suit, and the first time he knew of any other insurance was after the fire; that while Walsh might have mentioned that there was an existing policy, he, the witness, had no recollection of having known anything about the other insurance until after the fire. He further testified that on August 4, 1898, the premium paid for the policy in suit was tendered to the plaintiff company, which declined to take it. The defendant thereupon moved the court to instruct the jury to return a verdict for the defendant, which motion was overruled, and defendant excepted.

The jury, under the instructions of the court, found that the defendant company issued to the plaintiff company the policy described in the plaintiff's petition; that the property covered by said policy of insurance