Hartford Accident & Indemnity Co. v. Hood

Barnhill, J.

The primary issue between plaintiff and defendant is clearly drawn. The plaintiff contends that its bond is for a single penalty of $10,000 which is the limit of the recovery which may be had against it for any and all defalcations occurring during the life of the bond, to wit, from 15 July, 1929, to 3 February, 1942. The defendant contends that the original bond' assured against defalcation during the succeeding year and each renewal constitutes a new-bond, so that he is entitled to recover losses arising out of the defalcation of the cashier during each bond year, not to exceed $10,000 for any one year. If plaintiff’s contention is sustained, defendant is entitled to judgment in the sum of $10,000. On the other hand, if the defendant’s construction of the contract is adopted he is entitled to judgment in the amount of $81,731.18, unless he is estopped by the conduct of the bank or is barred in whole or in part by the statute of limitations.

G. S., 53-90, provides that active officers and employees of a bank, before entering upon their duties, shall give bond to the bank in a bonding company authorized to do business in North Carolina in the amount required by the directors and upon such form as may be approved-by the commissioner of banks. Both the commissioner of banks and the directors are authorized to require an increase of the amount of such bond whenever they may deem it necessary.

This is the only provision of our statutes which must be deemed to be incorporated in the contract.

Hutchins v. Durham, 118 N. C., 457 , 32 L. R. A., 706;

Craves v. Howard, 159 N. C., 594 , 75 S. E., 998 , Ann. Cas. 1914C, 565;

Steele v. Ins. Co., 196 N. C., 408 , 145 S. E., 787 , 61 A. L. R., 821;

Monger v. Lutterloh, 195 N. C., 274 , 142 S. E., 12 ;

Bank v. Bank, 262 U. S., 649 , 67 L. Ed., 1157 , 30 A. L. R., 635; 12 A. J., 769.

The bond furnished by plaintiff is in the exact form prescribed by the commissioner of banks and is in the amount required by the by-laws of *710 the bank, under which, tbe directors operated. Neither they nor the commissioner of banks ever demanded or required any additional bond or any increase in the amount. Instead the directors on four separate occasions approved the bond as filed.

The assumption of liability is not limited to one year or any other fixed term, to be extended or renewed upon the payment of a stipulated premium.

Woodfin v. Ins. Co., 51 N. C., 558 ;

Jacksonville v. Bryan, 196 N. C., 721 , 147 S. E., 12 . It guarantees the payment of any loss, not exceeding $10,000, sustained by the bank through the dishonesty of Slayton at any time during his continuous service as cashier, “but before the Employer shall become aware of any default on the part of the Employee, and discovered before the expiration of three years from the termination of such employment or cancellation of this bond, whichever may first happen.”

This language is clear and unambiguous. Plaintiff agreed to reimburse the bank for losses incurred during the life of the bond through the default of Slayton to the extent of $10,000. It must be presumed the parties intended what the language used clearly expresses, Kihlberg v. U. S., 97 U. S., 398 , 24 L. Ed., 1106 ; 12 A. J., 752, and the contract must be construed to mean what on its face it purports to mean.

Hinton v. Vinson, 180 N. C., 393 , 104 S. E., 897 ;

McCain v. Ins. Co., 190 N. C., 549 , 130 S. E., 186 ;

Wallace v. Bellamy, 199 N. C., 759 , 155 S. E., 856 ;

Jacksonville v. Bryan, supra; Thornton v. Barbour, 204 N. C., 583 , 169 S. E., 153 ;

Grocery Co. v. R. R., 215 N. C., 223 , 1 S. E. (2d), 535 ; 12 A. J., 751.

The Court, under the guise of construction, cannot reject what the parties inserted, Schneider v. Turner, 130 Ill., 28 , 22 N. E., 497 , or insert what the parties elected to omit.

Hayes v. O’Brien, 149 Ill., 403 , 37 N. E., 73 . It has no power to write into the contract any provision that is not there in fact or by implication of law.

Cook v. Smith, 3 A. L. R., 940;

Hawkeye Commercial Men’s Asso.

v. Christy, 294 Fed., 208 , 40 A. L. R., 46; 12 A. J., 749.

Our conclusion that defendant’s recovery may not extend beyond the one penalty stipulated in the contract is sustained by former decisions of this Court, Jacksonville v. Bryan, supra; Thornton v. Barbour, supra, and is in harmony with the great weight of authority. Anno. 42 A. L. R., 834;

Bank of England, Ark., v. Md. Cas. Co., 293 Fed., 783 ;

Chatham Real Est. & I. Co. v. U. S. F. & G. Co., 90 S. E., 88 ;

State ex rel. Freeling v. Casualty Co., 42 A. L. R., 829;

Bank v. Fidelity & D. Co., 45 A. L. R., 610;

Leonard v. Aetna Casualty & Surety Co., 80 F. 2d, 205 ;

Brulatour v. Aetna Casualty & Surety Co., 80 F. 2d, 834 ;

Bank & Tr. Co. v. F. & D. Co., 281 S. W., 785 ;

Hack v. Surety Co., 96 F. 2d, 939 .

*711 While there are decisions contra,, cited by defendant, they are, in most instances, factually distinguishable.

Hood, Comr. of Banks, v. Simpson, 206 N. C., 748 , 175 S. E., 193 , cited and relied on by defendant, is not in conflict. While the facts in that case are in many respects similar, as clearly outlined in defendant’s brief, there are material factual distinctions. Furthermore, in that case there were two bonds in the penal sum of $10,000 each. Notwithstanding the loss was in excess of $20,000, it was stipulated that if the court was of the opinion the two contracts constituted separate bonds, cumulative in effect, plaintiff should recover an amount equal to the total of the penal sums of the two. The court below held that there were two separate contracts imposing cumulative liability and entered judgment for $20,000 as agreed by the parties. We affirmed.

In the light of our conclusion as to the nature of the contract at issue the questions of estoppel and of the bar of the statute of limitations raised by plaintiff become immaterial and need not be discussed.

The one arresting circumstance in this record which “sticks out like a sore thumb” is the fact that the cashier of a small bank could abstract from the funds of his employer an amount equal to approximately twelve times the capital stock of the bank before his peculations were discovered. Wherever the fault may lie, the plaintiff must make good the losses thus sustained by the bank to the extent of the penal sum of its bond only.

The judgment below is Affirmed.