Union Central Life Ins. v. United States Fidelity & Guaranty Co.

McSherry, C. J., delivered the opinion of the Court. This suit was brought by the Union Central Life Insurance Company, a body corporate, against the United States Fidelity & Guaranty Company, also a body corporate. The appellant company, which was the plaintiff in the Court below, sued the appellee company upon a bond executed by the latter and by which the Fidelity Company guaranteed the honesty of an employee of the Life Insurance Company. The bond upon which the suit was brought .is in the usual form of a fidelity bond.

The following is among the provisions which it contains : “Provided further, that this bond is issued on the express understanding that the employee has not within the knowledge of the employer at any former period been a defaulter and will be invalid unless signed by the employee." Further it is provided “that it is essential to the validity of this bond that the employee's signature be hereunto subscribed and witnessed." There is a clause in the bond by which the employee covenants and agrees with the Bonding Company that he will save and keep harmless that company from and against all loss and damage which the Bonding Company shall or may at any time sustain by reason of having entered into the indemnity bond. At the foot of the bond there is a place indicated for the signature of the employee opposite a seal intended as the employee’s seal. The bond sued on was delivered by the Bonding Company to the Life Insurance Company, but it never was signed by the latter’s employee whose fidelity it guaranteed. The premium was paid for the first year.

Before the expiration of the first year the bond was renewed upon the payment of an additional premium, and a renewal receipt was given wherein it was stated that the Fi ⁴³⁰ delity and Guaranty Company continued in force the same bond for the period beginning on the 15th of June, 1901, and ending on the 15th of June, 1902, “subject to all the covenants and conditions of said original bond heretofore issued on the 15th day of June, 1900.” Subsequently, that is to say, on the 10th of April, 1902, the bond was again renewed and a second renewal certificate of the same tenor and effect as the first was again issued, continuing the bond in force until the 15th of June, 1903. Thereafter, the appellant discovered that the employee whose'fidelity the bond guaranteed had become a defaulter and an embezzler, and thereupon it demanded indemnity from the Fidelity & Guaranty Company. The latter disputed its-liability, and suit was brought to recover on the bond.'. The declaration' set out the bond and the two renewal receipts; and averred the defalcation.

To'this declaration, the appellee, the- defendant below, demurred; the Court sustained the demurrer and gave judgment for the defendant, and thereupon this appékl was taken. The sole question in the case is whether the failure of the appellant’s employee, whose fidelity was guaranteed, to sign the bond of indemnity',‘prevented the bond from becoming operative and effective. Contracts of this character, like policies of fire insurance to which they are closely analogous though-with which they are not strictly identical, must receive a reasonable construction so as to give effect to the in tention of the parties thereto, and so as to carry out rather than defeat .the purposes for which they were executed. They should neither, on the • one hand, be so narrowly or technically interpreted as-to frustrate their -obvious design; nor, oh the other hand, so loosely or inarti-ficially as to relieve the obligor' from a liability fairly-within the'scope or sp'irit of their terms.

Credit Indem. Co. v. Cassard, 83 Md. 276 . If a recovery be permitted in this action it' must be- had in 'spite of the'definite provision thkt the bond-should not be binding unless' signed by the employee' whose fidelity it was intended tq gu'-áfanteé.' The provisions' which- have been qu'óted above aré deelareddn the bond itself to be ^conditions-precedent- to the ⁴³¹ right on the part of the employer to recover