First Nat. Bank v. National Surety Co.

Citations

• 130 F. 401
• 66 L.R.A. 777
• 1904 U.S. App. LEXIS 4172

Syllabus

<p>1. Application of Payments — Rights of Surety — Indemnity Insurance eob Speoieic Term.</p> <p>Defendant, a surety company, executed a bond to plaintiff bank by which it undertook, for the term of one year, to indemnify plaintiff against loss sustained by the dishonesty of employés. Action was brought thereon to recover for loss alleged to have occurred during the term through the action of a bookkeeper in falsifying the account of a depositor so as to increase his apparent credit balance, by which he was enabled to and did overdraw his account to a large amount. Such false entries and overdrafts continued through four years, but defendant’s bond covered only about three months of the last part of the bookkeeper’s employment, there having been bonds with different sureties covering a portion at least of the previous time. The depositor’s account was the ordinary running account, subject to check, and continuous during all the time, and no application of deposits to any particular item of debit was made by either party, nor by implication, there having at no time been an overdraft as shown by the books. The false entries and overdrafts continued for a part of the time after defendant’s bond went into effect, but subsequent deposits made prior to the time the bookkeeper’s employment terminated exceeded the checks paid during the same time in an amount greater than such overdrafts. Held, that the ordinary rule in such cases between debtor and creditor, that payments should be appropriated to the oldest item of indebtedness, could not be applied as against a surety whose obligation covered a distinct portion of the time during which the account was running, but that as between plaintiff and defendant all deposits made during the currency of the bond would be applied by the court to the debit items made during the same time, and, it appearing that they exceeded the sums drawn out, there was no loss to the bank during the term for which defendant was liable.</p> <p>2. S