Opinion
December, 1904.
George P. Keating and Love Quackenbush, for the appellant.
John Cunneen, V.H. Riordan and Henry W. Killeen, for the respondent.
The judgment and order should be affirmed, with costs.
The action was brought upon bonds given by the defendant, as surety for one Tipton, the secretary and treasurer of the Switchmen's Union, represented by the plaintiff, to recover an amount misappropriated by Tipton. There were two bonds, one given January 11, 1899, and the other June 5, 1900. The whole amount misappropriated was $2,638.89. The jury by a special verdict found that $1,035 of this amount was misappropriated during the time the first bond was in force and before the second bond was given; concededly the remaining $1,603.89 was misappropriated after the second bond was given and while it was in force. The theory of the plaintiff, presented by its complaint and upon the trial, is that the second bond was not a separate and distinct one, but was a renewal of the first one, a continuance of the original liability in an increased amount, and for that reason, among others, the $1,035 was recoverable even though misappropriated before the second bond was given. It seems to us, however, that this amount is recoverable even regarding the bonds as separate and distinct obligations. A determination of this question involves a construction of some of the language of the bonds. They both alike provide that the defendant shall be liable for moneys misappropriated, and now we quote, "occurring during the continuance of this bond or any renewal thereof and discovered during said continuance or within six months thereafter, or within six months from the death or dismissal or retirement of the employee from the service of the said employer." And again, "That the Company, upon the execution of this bond, shall not thereafter be responsible to the employer, under any bond previously issued to the employer on behalf of said employee, and upon the issuance of any bond subsequent hereto upon said employee in favor of said employer, all responsibility hereunder shall cease and determine, it being mutually understood that it is the intention of this provision that but one ( the last) bond shall be in force at one time, unless otherwise stipulated between the employer and the Company."
First, it is said that the misappropriation of this $1,035 was not discovered within the time provided in the bond as above quoted, and, therefore, it cannot be recovered. The second bond was given June 5, 1900, and the discovery of the misappropriation was not until March 6-11, 1901. So that it may be said the discovery was not during the continuance of the first bond, or within six months thereafter. But the employee was dismissed at once upon the discovery being made. So that the discovery was within six months from his dismissal or retirement from the service of the employer.
There is no reason under this provision of the bond, therefore, why this amount should not be recovered. Second, it is said that no recovery can be had of this amount under the second bond, by reason of the provision above quoted, the misappropriation having occurred before such bond was given, and this is true. But a recovery can be had for this amount under the first bond, and nothing in the provision above quoted forbids such recovery. The language is that "upon the issuance of any bond subsequent hereto * * * all responsibility hereunder shall cease and determine," and then it is added that the intention is that but one bond shall be in force at one time. In this case the defendant was liable under the first bond for this $1,035 before the second bond was given, though the discovery of the misappropriation had not been made. The defendant did not, upon giving the second bond, become liable thereunder for this amount upon discovery of the misappropriation. Was it the intention of the provision quoted to release the defendant, upon the giving of the second bond, from all liability for the money which had been misappropriated, but not then discovered? The language of the former provision quoted implies that the defendant would be liable for money misappropriated during the continuance of the first bond, though not discovered for six or more months thereafter. So that if the first bond had been terminated for any other reason than because another one was given, the liability would continue beyond the continuance of the bond, until the discovery of the misappropriation. It is not reasonable to suppose that in the same bond the provision was made that a liability thereunder not discovered at the time a subsequent bond was given would be canceled by the giving of such subsequent bond.
The more reasonable construction of the provision quoted is that the intention was to terminate all responsibility under the first bond upon the issuance of the second one, so far as future misappropriation was concerned, so that there should be but one bond in force at the same time, but that it was not intended to cancel any liability already incurred while the first bond was in force. The rule of liability would then be the same, whether the first bond was terminated by the giving of a second bond or for any other reason. Liability already incurred for undiscovered misappropriation would still continue. The provision is that all responsibility, not all liability, should cease and determine upon the issuance of the subsequent bond. It would be unconscionable to provide that all liability for prior undiscovered misappropriation should be canceled by the giving of the second bond.
So much for the right to recover this $1,035. It is said that no recovery can be had of the $1,603.89 under the second bond because the employer's certificate, made when that bond was given, constituted a warranty of the facts therein stated, or at least a misrepresentation of facts upon which the defendant relied in issuing the bond. The difficulty about this contention is that in either case it must appear that the statements made were untrue, otherwise there would be no breach of the warranty, and no ground for defeating the bond by reason of false representations. The statements as to the employee's former conduct, performance of his duties, keeping of his accounts and freedom from default, are stated upon the best of the knowledge and belief of the employer, and it is not claimed that the plaintiff or those representing him had any knowledge, information or suspicion at that time that the employee was not perfectly honest and reliable.
The statement that his accounts were found on examination to be correct up to that time was true. They did not discover for months thereafter that he had misappropriated this $1,035 prior to the giving of the second bond. There was no absolute statement that he was honest, or reliable or free from default, or that his accounts were correct. The statement was to the best of the employer's knowledge and belief and there is no reason for saying such statements were untrue, or that his employer had any idea that he was not just what he should be.
Our conclusion is that the judgment and order should be affirmed.
All concurred.
Judgment and order affirmed, with costs.