Melville Fuller

“ But this rule cannot be availed of to refine away terms of a contract expressed with sufficient clearness to convey the plain meaning of the parties, and embodying requirements compliance with which is made the condition to liability thereon.
Whatever the common-law duty on the part of the employer to notify the guarantor of the fraud or dishonesty of the employee whose fidelity is guaranteed, the parties to this contract undertook to declare the duty of the bank to the company in certain specified particulars. ”

“ And, in view of the plain object of the clause, we cannot regard the words as equivalent to 'becoming satisfied,' though perhaps they may be to 'having reason to believe.' Even then these facts would have demanded investigation or notification, for we think the bank cannot be heard to say it did not have reason to believe that Schardt was speculating when it took his professions of repentance as sufficient assurance that he had ceased speculating, and turned its back on any independent inquiry or investigation. ”

“ It seems to us that the obvious meaning of 'becoming aware,' as used in this bond, is 'to be informed of,' or 'to be apprised of,' or 'to be put on one's guard in respect to,' and that no other meaning is equally admissible under the terms of the instrument. These are the definitions of the lexicographers, distinctly deducible from the derivation of the word 'aware,' and that is the sense in which they are here employed. It is used in the same sense in the cashier's certificate on the renewals of the teller's bond.
To be aware is not the same as to have knowledge. ”

“ The Mechanics' Savings Bank & Trust Company was a banking institution located at Nashville, Tennessee, with a capital of $50,000. John Schardt was its teller from 1888 to January, 1893, when he was elected cashier, and remained such until his death on April 17 following. As teller and cashier he embezzled more than $100,000 of the funds of the bank, beginning in 1890 and continuing until about the time of his death. In discovering the defalcation the bank ascertained its insolvency, closed its doors, and made a general assignment for the benefit of its creditors. ”

“ Engagement in speculation or gambling was what the company sought to guard against because experience had admonished it of the probability that speculation or gambling would lead to acts involving loss of which it would be responsible. Bad faith, in the view of the courts below, would not exist if the bank had such confidence in Schardt's integrity that it accepted his bare statement that he was not speculationg as overcoming the weight of his admission that he had been. ”

“ A general ledger, showing generally the accounts of the bank, including the account in totals of the deposits made and checked out daily; a cash book, giving each day's business; a daily balance book, which was a summary of the general ledger; these three books were kept by Schardt; and an individual ledger, which showed in detail the deposit account of each individual depositor, and was kept by a clerk, who had no other duties, and was known as individual bookkeeper. ”

“ That any written answers or statements made by or on behalf of said employer in regard to or in connection with the conduct, duties, accounts, or methods of supervision of the said employee delivered to the company, either prior to the issue of this bond or to any renewal thereof, or at any time during its currency, shall be held to be a warranty thereof, and form a basis of this guarantee or of its continuance. ”

“ The bond provided that the company covenanted with the bank in reliance on the statement and declaration of the president on behalf of the bank, and on the bank's strict observance of the contract; that any misstatement of a material fact in the declaration should invalidate the bond ”

“ The letter stated that Schardt was in partnership in a bucket shop. Schardt said it was a lie, and brought his partners before the president and the two directors, and they said that they had opened a brokerage association with Schardt, but that Schardt had sold out. This director subsequently heard again that Schardt was speculating and went to Schardt's house and interviewed him, and he said he did not own any stocks at all; he had sold everything he had. He heard this again shortly after the cashier's bond was given, and Schardt again denied it. ”

“ That the said employee has not, to the knowledge or belief of said employer, been guilty of any serious dereliction of duty, or default in this or any other service, or that his habits have been such as to incur said employer's censure, previous to the issue of this bond. ”

“ In case of applicant handling cash or securities, how often will the same be examined and compared with the books, accounts, and vouchers, and by whom?-A. Not less than quarterly, and often monthly, by finance committee.
Q. 15. In case of applicant acting as teller: (a) Will he be required to balance his cash daily, and report same to president or cashier? (b) And will a record of same be kept? A. . . .
Q. 16. Will applicant handle funds or securities not subject to a routine check or periodical examination? If so, please describe their nature?-A. No. ”

“ Q. 4. Have you known or heard anything unfavorable as to his habits or associations, past or present?-A. No.
Q. --. Or of any matters concerning him about which you deem it advisable for the company to make inquiry?-A. No. ”