Court Opinion

ID: 9442801
Source: CourtListenerOpinion
Date Created: 2023-08-03 19:00:26.011386+00
Date Added: 2024-06-11T17:29:14.569339
License: Public Domain

CLARK, Circuit Judge
(dissenting).
I regret that I cannot agree with my distinguished colleagues as to this case.
The facts are simple. Appellee had bonded the employees under a blanket position bond. The maximum indemnity under the bond was $5000.00. From 1942 through 1946 this bond was renewed from year to year by bill for renewal of bond for one year which so stated. In 1946 the bond was renewed for three years to 1949.
At the end of 1948 appellant discovered that its bookkeeper had embezzled the following sums in the following years:
1945 ................. $ 5,498.32
1946 ................. 3,975.47
1947 ................. 13,281.45
1948 ................. 17,555.90
Appellant filed suit against appellee for $18,975.47 or $5000.00 per year the maximum coverage for 1945, 1947 and 1948 and for $3,975.47 for 1946. Appellee admitted liability for $5000.00 and plaintiff received judgment for that amount, but judgment was granted in favor of appellee on the amount in excess of $5000.00 From that this appeal is taken.
This is apparently a case of first instance in this jurisdiction. Courts in other jurisdictions, including many Federal Courts and many respectable state courts, have been in violent disagreement. Some courts have held that a renewal bond is a continous liability limited to the provisions of the original bond. This theory would limit the entire amount ever to be recovered under the bond, even if premiums were paid for twenty-five years or longer to $5,000.00 all told. It overlooks the salient fact of the improbability that any one except a congenital idiot would be likely to go on paying premiums on an extinct bond from which there was no possibility of protection in the future. But many courts, certainly with an equal weight of authority, have taken the view that a renewal of a bond is a separate and distinct contract for each renewal period and that the surety is liable for losses occurring in each renewal period.
The opinion of the majority of this court as I understand their contention is that under the bond all right to indemnity was exhausted in 1945 but that the bonding company was within its rights in going right ahead billing and collecting for periods in which absolutely no protection was afforded. With this view I completely disagree. I regard such conduct on the part of the surety as common thievery. Great stress is laid by the majority on the provision in the bond that “the payment of *661annual premiums during such terms shall not render the amount of this bond cumulative from year to year.”
This term is certainly ambiguous. It might mean, as the bonding company contends, that one indemnity of $5000.00 is all that can ever be paid under this bond or any renewal of it.
The far more reasonable construction is that it simply means that the coverage on years when no loss was suffered cannot be carried over to cover losses in a subsequent 3rear when losses were in excess of $5000.00.
The mere fact that judges of the courts of the United States and various State Courts have so sharply differed as to the construction to be placed upon this language, and similar language, and the further fact that the judges of this court differ widely in their views is strong evidence of its ambiguity.
This bond was drawn up by the bonding company and its lawyers. It is a universally recognized rule that wherever ambiguity appears in a contract it must be construed most strongly against the party who drew it and in favor of the party who did not draw it. I think the judgment of the District Court should be reversed outright.